21936mtp Cptvolu1 Part4 PDF

BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

COMMON PROFICIENCY TEST
Model Test Paper – BOS/CPT – 16
Time : 4 hours Maximum Marks : 200
The test is divided into four sections.
SECTION – A : FUNDAMENTALS OF ACCOUNTING (60 MARKS)
1. An increase in owner’s capital is recorded by:

(a) Debiting the capital account. (b) Crediting the capital account.
(c) Crediting the cash account. (d) None of the above.
2. Users of accounting information include
(a) Suppliers (b) Lenders
(c) Customers (d) All the above
3. Accounting standards in India are issued by:
(a) Central Govt. (b) State Govt.
(c) Institute of Chartered Accountants of India (d) Reserve Bank of India
4. Cost of advertisement for the products of a company is a_________
(a) Capital expenditure (b) Revenue expenditure
(c) Deferred revenue expenditure (d) Capital lost
5. Personal accounts relate to:
(a) machinery account, cash account, (b) expenses, losses, gains, revenue etc.
rent account
(c) person, trade receivables or trade payables. (d) assets of firm but not debt
6. Nominal account is governed by following rules:
(a) Debit what comes in, Credit what goes out
(b) Debit all expenses & losses, Credit all income & gain.
(c) Debit the receiver, Credit the giver
(d) None of the above.
Common Proficiency Test (CPT) Volume - I 427
© The Institute of Chartered Accountants of India

MODEL TEST PAPER - 16
7. The accounting policies once adopted are not changed unless there is an urgent need for
such change is based on
(a) Money measurement concept (b) Accrual concept
(c) Consistency (d) Conservation
8. Cash column in cash book has always ______
(a) Debit balance (b) Credit balance
(c) Overdraft balance (d) Both Debit and Credit balance
9. Depletion method of depreciation is used in _____
(a) Cattle, loose tools etc. (b) Mines and quarries
(c) Machinery and Building (d) None of these
10. Goods purchased from A for Rs. 2000 passed through the sales book. The rectification of
this error will result in ________
(a) Decrease in Gross profit (b) No effect on Gross profit
(c) Increase in Gross profit (d) Increase in Trade receivables
11. While preparing the trial balance from the ledger balances, the drawings account is placed in:
(a) Debit column of trial balance (b) Credit column of trial balance
(c) Suspense Account (d) None of the above.
12. Unpaid salary of Rs. 5,000 is to be recorded in the
(a) Purchase Return book (b) Bill receivable book
(c) Purchase book (d) Journal Proper
13. Capital expenditure are recorded in the _______
(a) Balance Sheet (b) Profit & Loss Account
(c) Trading Account (d) Manufacturing account.
14. In case of Debit Balance the words __________ are written on the debit side.
(a) To balance b/d (b) To balance c/d
(c) By balance b/d (d) By balance c/d
15. Outstanding wages in trial balance is recorded in ________
(a) Trading account (b) Profit & Loss account
(c) Balance sheet (d) None of the three
16. Amount spent for replacement of worn out part of machine is:
(a) Deferred Revenue expenditure
(b) Revenue expenditure
(c) Capital expenditure
428 Common Proficiency Test (CPT) Volume - I

17. _________ is not added in the total of Balance sheet.
(a) Fixed liability (b) Current liability
(c) Contingent liability (d) None of the three
18. Which of the following errors will not affect the trial balance?
(a) A credit sale of goods to X Rs 17 posted as Rs 71
(b) A cash sale of goods to X Rs 17 posted as Rs 71
(c) A credit sale of furniture to X Rs 17 posted as Rs 71
(d) All of the above
19. ___________ Reserve is not shown in Balance Sheet.
(a) General (b) Capital
(c) Secret (d) None of the three
20. Capital expenditure provide _________ benefit.
(a) Short period (b) Long period
(c) Very short period (d) None of the three
21. Suraj consigned goods costing Rs. 250,000 to Mohan on 1st Jan 2006 by incurring Rs. 20,000
on freight. Some goods were lost in transit. For remaining goods Mohan spent Rs. 15,000 to
take the delivery including storage charges. During the quarter, agent sold ¾ of the
goods received by him for Rs. 3,00,000 and charged commission @ 10% on it. Suraj
asked the details of goods lost, sold, expenses, commission and balance due to him
alongwith the consignment inventory from Mohan. As desired, agent sent the periodical
details statement commonly known as:
(a) Account sales (b) Summary Statement
(c) Account statement (d) Statement of affairs.
22. A businessman purchased goods for Rs. 25,00,000 and sold 80% of such goods during
the accounting year ended 31st March, 2009. The market value of the remaining goods
was Rs. 4,00,000. He valued the closing inventory at cost. He violated the concept of:
(a) Money measurement (b) Conservatism
(c) Cost (d) Periodicity
23. An item of Rs. 500 relating to prepaid rent account was omitted to be brought forward. The
rectifying journal entry will be:
(a) Rent A/c Dr 500
To Cash 500
(b) Prepaid rent A/c Dr. 500
To Cash 500
(c) Prepaid rent A/c Dr. 500
To suspense 500
(d) None of the three

24. Cash Sales 50,000

Cash Collected from customers 1,30,000
Bad Debts during the year 5,000
Trade receivables at the beginning 10,000
Total sales will be ______
(a) Rs. 175,000 (b) Rs. 170,000

(c) Rs. 180,000 (d) Rs. 178,000
25. An asset is purchased for Rs. 25,000, depreciation is to be provided annually according to
straight line method. Useful life of the asset is 10 years and the residual value is Rs. 5,000.
Rate of depreciation will be ______
(a) 10% (b) 8%
(c) 12% (d) 15%
26. Rs. Rs.
Opening inventory 5,570 Purchases 13,816
Closing inventory 8,880 Sales 15,248
Purchase return 390 Import charges 1,650
Sales return 524 Salary & wages 1,000
Above figures will show Gross Profit ________________
(a) Rs. 3,000 (b) Rs. 2,958
(c) Rs. 2,500 (d) Rs. 4,000
27. Inventory worth Rs. 10,000 (cost price Rs. 7,500) taken by Mohan office clerk. Amount
to be deducted from his salary in the subsequent month. Journal entry will be
(a) Dr Salary and Cr Purchases A/c Rs. 10,000

(b) Dr Mohan and Cr purchases Rs. 10,000
(c) Dr Salary and Cr Purchases Rs. 7500
(d) None of the above
28. Cost of goods sold is 100,000
Opening inventory 5,000
Closing inventory 10,000
Amount of purchases will be _______
(a) 105,000 (b) 120,000

(c) 95,000 (d) 130,000
29. Rent has been paid for 11 months from April to February 2010 amounting
Rs. 55,000. The amount of outstanding rent shown in the balance sheet will be
(a) Rs. 6,000 (b) Rs. 5,000
(c) Rs. 4,000 (d) None of the above.

30. Capital introduced by Mr. A on 01.04.09 Rs. 300,000, further capital introduced during
the year was Rs. 50,000 in the mid of the year. Mr. A withdrew Rs. 2,000 on the first day
of each month. Interest on drawings is charged @ 5%. Profit earned during the year was
Rs. 20,000. Capital at the end of the financial year will be __________
(a) Rs. 3,45,350 (b) Rs. 3,95,000
(c) Rs. 3,46,000 (d) None of the three
31. A cheque of Rs. 1000 received from Ramesh was dishonoured and had been posted to the
debit of sales return account. Rectifying Journal entry will be ____________
(a) Sales return A/c Dr 1000
To Ramesh 1000
(b) Ramesh Dr. 1000
To Sales return 1000
(c) Sales return of Dr. 1000
To Suspense 1000
32. A purchased goods costing Rs. 42,500. B sold goods costing Rs. 40,000 at Rs. 50,000.
Balance goods were taken over by A at Rs. 4,000. The profit on joint venture is
(a) Rs. 11,500 (b) Rs. 7,500
(c) Rs. 3,500 (d) Nil
33. Cost of machine Rs. 135,000
Residual value Rs. 5,000
Useful life 10 years.
Company charged depreciation for the first 5 years on straight line method. Later on, it
reviewed the useful life and decided to take it as useful for another 8 years. In the 6 th year
amount of depreciation will be __________
(a) Rs. 8,000 (b) Rs. 8,125
(c) Rs. 9,000 (d) Rs. 8,500
34. Mohan and Krishna are equal partners. They admitted Ram for ¼ share in future profits.
New profit sharing ratio will be __________
(a) 3:3:2 (b) 3:2:1
(c) 2:2:1 (d) Cannot be calculated.
35. Expenses incurred by the consignor on sending goods to consignee are Rs. 1000 for packing,
Rs. 1500 on freight and Rs. 500 for insurance, while expenses incurred by the consignee on
behalf of consignment are Rs. 300 on Octroi, Rs. 800 Godown rent and Rs. 1000 selling
expenses. Expense amount to be excluded while calculating consignment inventory will
be
(a) Rs. 1,800 (b) Rs. 2,100
(c) Rs. 2,000 (d) Rs. 2,600

36. A, B and C are partners sharing profits in the ratio of 4:3:2. B retires. A and C decide to
share profits in future in the ratio of 5:3. Gaining ratio between A and C will be ______
(a) 13:11 (b) 12:10
(c) 10:12 (d) None of the three
37. Virender Ltd. forfeited 20 shares of Rs. 100 each (Rs. 60 called up) issued at par to Ram
on which he had paid Rs. 20 per share. All the forfeited shares were reissued to Syam as
Rs. 60 paid up for Rs. 45 per share. Amount transferred to capital reserve will be.
(a) Rs. 150 (b) Rs. 100
(c) Rs. 75 (d) Rs. 60
38. Consignee is entitled to get a commission of Rs. 25 per article sold plus one fourth of the
amount by which gross sale proceeds less his total commission thereon exceeded a sum at
the rate of Rs. 125 per articles sold. He sold 450 articles at Rs. 73,800. Commission amount
will be____
(a) Rs. 12,510 (b) Rs. 10,510
(c) Rs. 10,000 (d) Rs.11,000
39. Goods worth Rs. 500 given as charity should be credited to
(a) Sales account (b) Purchases account
(c) Charity account (d) None of the three
40. A company issued Rs. 1,00,000 15% Debentures at a discount of 5% redeemable after 10
years at a premium of 10%. Loss on issue of debentures will be:
(a) Rs. 15,000 (b) Rs. 12,000
(c) Rs. 10,000 (d) None of the three
41. Money spent to reduce working/revenue expense is:
(a) Capital expenditure
(b) Deferred Revenue expenditure
(c) Revenue expenditure
42. Alok Ltd. forfeited 300 shares of Rs. 10 each fully called up held by Ram for non payment
of allotment money of Rs. 3 per share and final call money of Rs. 4 per share. Out of
these 250 shares were reissued to Syam for a total payment of Rs. 2000. Amount
transferred to capital Reserve will be ______
(a) Rs. 200 (b) Rs. 250
(c) Rs. 300 (d) None of the three

43. A company issued debentures of the face value of Rs. 100,000 at discount of 6% on Jan
2009. These debentures are redeemable by annual drawings of Rs. 20,000 made on 31st
December each year. Directors decided to write off discount based on the debentures
outstanding each year. Discount written off in the fifth year will be _______
(a) Rs. 400 (b) Rs. 500
44. A, B and C are partners sharing profits in the ratio of 4:3:2 D is admitted for 1/3rd share in
future profits. Sacrificing ratio will be __________
(a) 4:3:2 (b) 3:2:3
(c) 2:3:2 (d) None of the three
45. What is the maximum allowable discount in case of re-issue of forfeited shares?
(a) 5% (b) 10%
(c) 15% (d) None of the above.
46. A and B are partners. A’s capital is Rs. 10,000 and B’s capital is Rs. 6,000 Interest is payable
@ 6% p.a. B is entitled to a salary of Rs.300 per month. Profit for the current year before
interest and salary to B is Rs. 8,000. Profit between A and B will be divided:
(a) A Rs. 1,720, B Rs. 1720 (b) A Rs. 2,000, B Rs. 1,440
(c) A Rs. 1,440, B Rs. 2000 (d) None of the three
47. A, B and C entered into partnership on 1st April, 2009 to share profits and losses in the ratio
of 4:3:3. A, however, personally guaranteed that C’s share of profit after charging interest on
capital @ 5% p.a. would not be less than Rs. 40,000 in any year. Capitals were as follows.
A Rs. 300,000 B Rs. 200,000 C Rs. 150,000
Profit for the year ended on 31st March 2010 amounted to Rs. 160,000. Sacrifice made by A
for C will be ________
(a) Rs. 1,750 (b) Rs. 1,800
(c) Rs. 2,000 (d) None of the above
48. A and B are partners sharing profits in the ratio of 6:4. C is admitted as a partner. The
new profit sharing ratio among A, B and C is 5:3:2. Sacrificing ratio will be _______
(a) 1:1 (b) 3:2

(c) 2:3 (d) None of the above.
49. A company issues 50,000 equity shares of Rs. 100 each at par the net amount payable is
as follows:
(a) On application Rs. 20 (b) On Allotment Rs. 20
(c) On First Call Rs. 25 (d) On Final Call Rs. 35
Shveti holding 100 shares did not pay final call money. Her shares were forfeited. Amount
credited to forfeited share a/c will be _______
(a) Rs. 6,000 (b) Rs. 6,500

50. A, B and C are equal partners with capitals of Rs. 1,00,000, Rs. 75,000 and Rs. 50,000
respectively. On C’s retirement his share is acquired by A and B in the ratio of 6:4 respectively.
Gaining ratio will be _________
(a) 3:2 (b)2:2
(c) 2:3 (d)None of the above
51. On admission of a partner, unrecorded investments worth Rs. 5000 and unrecorded
liability towards suppliers for Rs. 1500 will be recorded in
(a) Revaluation A/c (b) Capital Accounts
(c) Realisation A/c (d) None of the three
52. Dr. balance as per cash book is Rs. 3000. Cheque issued but not presented for payment Rs.
500, Interest collected by Bank Rs. 400, Deposit by a Customer direct into his bank Rs. 250.
Bank reconciliation statement will show balance as per Pass Book _______
(a) Rs. 4,150 (b) Rs. 4,000
53. Goodwill is to be calculated at one and half years purchase of average profit of last 5 years.
The firm earned profit during the first 3 years as Rs. 20,000, 18,000 and 9,000 and suffered
losses of Rs. 2,000 and 5,000 in last 2 years. Goodwill amount will be _______
(a) Rs. 12,000 (b) Rs. 10,000
54. A started business with Rs. 10,000 cash and Rs. 2,000 furniture. Sales amounted to
Rs. 50,000 including Rs. 5,000 cash sale. Rs. 10,000 sales were outstanding at the end of the
year. Cash balance will be ___________
(a) Rs. 50,000 (b) Rs. 45,000
55. Depreciation at 5% on office furniture of Rs. 8,000; at 10%on Plant and Machinery of
Rs. 80,000; at 5% on Factory Building of Rs. 2,00,000. Total depreciation will be ______
(a) Rs. 18,000 (b) Rs. 18,400
56. As old machinery appearing in the books at Rs. 5,000 is to be exchanged for a new machinery
of Rs. 5,000. The old machinery has been valued at Rs. 800 for exchange purpose. Loss on
exchange will be _________
(a) Rs. 4,000 (b) Rs. 4,200
(c) Rs. 4,500 (d) NIL
57. Goods of Rs. 600 (sales price) sent on sale on approval basis were included in the sales book.
The profit included in the sales was 20% on cost. Inventory with the party will increase
our closing inventory by ________
(a) Rs. 600 (b) Rs. 500

58. At the time of recording the transaction in journal which types of error may happen:
(a) Error of principle (b) Error of omission
(c) Error of commission (d) All of the above.
59. Cheque of Rs. 700 received from Hariram in settlement of a debt of Rs. 720, was
dishonoured and returned. Entry for dishonour will be _______
(a) Hari Ram Dr. 700
To Bank 700
(b) Bank Dr. 700
Discount Dr. 20
To Hari Ram 720
(c) Hari Ram Dr. 720
To Bank 700
To Discount 20
60. Paid rent to landlord Rs. 2,400, debited to Land Lord’s A/c by Rs. 2,004. Rectifying
entry will be ________
(a) Rent A/c Dr. 2400
To Landlord 2400
(b) Rent A/c Dr. 2004
To Landlord 2004
(c) Rent A/c Dr. 2400
To Landlord 2004
To Suspense 396
SECTION – B : MERCANTILE LAWS (40 MARKS)
61. In which form of contract the property in goods passes to the buyer immediately
(a) Agreement to sell (b) Hire purchase
(c) Sale (d) Auction sale
62. Which of the following modes of delivery of goods is considered effective for a valid contract
of sale
(a) Actual delivery (b) Symbolic delivery
(c) Constructive delivery (d) All of these
63. Goods which are in existence at the time of the contract of sale is known as:
(a) Present goods (b) Existing goods
(c) Specific goods (d) Future goods

64. The Right of Lien means:

(a) To refuse to deliver the goods
(b) To take back delivery of goods
(c) To hold goods until payment is made
(d) None of these
65. The right of lien can be exercised:
(a) Only for the price (b) Only for the expenses
(c) Either for the price and expenses (d) All of these
66. In case of breach of contract by the seller, the buyer has rights:
(a) For suit for damages (b) Suit for specific performance
(c) Suit for recession of contract (d) All of these
67. In case of perishable goods the unpaid seller can:
(a) Resell goods
(b) Not resell goods
(c) Resell after giving notice to the buyer
(d) Resell goods without giving notice to the buyer
68. The Indian Partnership Act is one of the branches of _____
(a) Special Contract Law
(b) Company Law
(c) Mercantile Law
(d) Business Law
69. The Law of Partnership is contained in the:
(a) Chapter XI of the Indian Contract Act
(b) Indian Partnership Act, 1932
(c) Indian Partnership Act, 1934
(d) Companies Act, 1956
70. Association of persons formed with the object to promote some beneficial purposes, is
called as-
(a) Partnership (b) Joint hindu family
(c) Club (d) Company
71. The partnership agreement may be __________
(a) Express or implied (b) Only written
(c) Only oral (d) Only implied

72. In a Joint Hindu family business:
(a) A male member becomes a member by his birth
(b) A female does not become its member by birth
(c) A male member becomes a member by the permission of Karta
(d) A male becomes member by operation of law
73. Which is not appropriate regarding the kind of partner:
(a) Actual partner (b) Sleeping partner
(c) Active partner (d) Dummy partner
74. A partner may retire from a firm:
(a) With consent of all other partners
(b) With the consent of main partner
(c) With the consent of sleeping partner
(d) No consent of any partner
75. Which is not true regarding the rights of a minor partner:
(a) He has a right to share of the property and profits of the firm as may have been agreed
upon.
(b) He has right to have access to and inspect and copy of books of the firm
(c) He has right to have access to and inspect and copy of any of accounts
(d) All of these
76. A partner may be expelled from partnership subject to which conditions:
(a) The power of expulsion of a partner should be conferred by the contract between the
partners
(b) The power should be exercised by majority of partners
(c) The power should be exercised in good faith
(d) All of these
77. An agreement to share earnings of smuggling business is:
(a) Valid (b) Void
(c) Voidable (d) Contingent
78. A party entitled to rescind the contract, loses the remedy when:
(a) He has ratified the contract
(b) The third party has acquired right in good faith
(c) Contract is not separable
(d) All of these
79. Standing offer means:
(a) Offer allowed to remain open
(b) Offer made to public in general

(c) When the offeree offers to qualified acceptance of the offer

(d) Offer made to a definite person
80. In F.O.B. Contracts, F.O.B. stands for
(a) Free on Bill (b) Free on Board
(c) Free on Boarded Ship (d) Free on Bill of Lading
81. In case the goods are destroyed or damaged or lost by accident, the loss will fall on ____
(a) The owner of the goods (b) The buyer
(c) The owner and the buyer (d) The third party
82. Where goods are sold by a person who is not the owner thereof, the buyer ______
(a) Acquires no better title to the goods than the seller had
(b) Acquires same title of the goods as the owner had
(c) No title of goods
(d) None of these
83. If there is breach of warranty, the aggrieved party can ________
(a) Only claim damages
(b) Treat the contract as repudiated
(c) Treat the Contract illegal
(d) All of these
84. If there is breach of contract of sale, the aggrieved party can _________
(a) File a suit for damages for non delivery of goods
(b) File suit for specific performance
(c) File suit for injunction
(d) All of these
85. Only __________ can be subject matter of a sale
(a) existing goods (b) future goods
(c) specific goods (d) contingent goods
86. The delivery of goods and payment of price are ______
(a) Concurrent conditions (b) Principal conditions
(c) Mutual conditions (d) All of these
87. A contract of sale involves transfer of __________
(a) Title of goods (b) Ownership
(c) Liability (d) None of these
88. A warranty is a stipulation ____________
(a) Essential to main purpose of contract of sale
(b) Collateral to the main purpose of contract of sale

(c) Secondary to the main purpose of contract of sale
(d) None of these
89. The unpaid seller may exercise his right of stoppage in transit __________
(a) By taking actual possession of the goods
(b) By giving notice of his claim to the carrier
(c) By giving notice of his claim to the bailee in whose possession the goods are
(d) All of these
90. The unpaid seller’s right of lien shall be lost ________
(a) When the goods are delivered to a carrier
(b) When the goods are delivered to a bailee
(c) When seller waives his right of lien
(d) All of these
91. The transit comes to an end
(a) When buyer takes the delivery
(b) When delivery is made to a ship
(c) When there is part delivery of goods
(d) All of these
92. The term seller includes
(a) Actual seller
(b) Any person who is in a position of seller
(c) Consignor of goods
(d) All of these
93. The seller of goods is deemed to be an unpaid seller _________
(a) When the part of the price has not been paid
(b) When the whole of the price has not been paid
(c) When a bill of exchange has been dishonoured
(d) All of these
94. Right of resale can be exercised
(a) Where the goods are of perishable nature
(b) When the seller expressly reserves a right of resale
(c) After giving reasonable notice
(d) All of these
95. C.I.F. contract is ____________
(a) Contract for the sale of insured goods
(b) Contract for sale of document
(c) Contract for sale of goods
(d) Contract for sale of specific goods

96. Partnership is the relation

(a) Between persons
(b) Between firms
(c) Among numberless persons who have agreed to share the profits of a business carried on
by them
(d) Established by way of land of agency.
97. The court may not dissolve the firm in case of ____________
(a) Insanity of a partner (b) Permanent incapabity of a partner
(c) Misconduct of a partner (d) Retirement of a partner
98. In settling the accounts of a firm after dissolution ________
(a) The good will must be included in the assets
(b) The good will must not be included in the assets
(c) The good will should be separated before settlement
(d) The goodwill should be distributed among all the partners
99. A invited B to a Birthday party. B promised to attend and give A Rs. 500 as a present on his
birthday. B failed to attend. What are remedies for A -
(a) A cannot recover any damages from B
(b) A can file suit for recovery of Rs. 500
(c) A can file a suit for breaking the promise
(d) A cannot file a suit for breaking the promise.
100. A owes C Rs. 10,000 but the debt is barred by the limitation Act. D signs a written promise
to pay C Rs. 5000 on account of the debt. Choose the best alternative
(a) A promise to pay a time barred debt is not enforceable
(b) It is not a valid contract
(c) It is a voidable contract
(d) A promise to pay full amount of Rs. 10,000 is a valid contract
SECTION – C : GENERAL ECONOMICS (50 MARKS)
101. Find the correct match of the following:

(a) Economics is a science of wealth – Alfred Marshall
(b) “The range of our enquiry becomes restricted to that part of social welfare that can be
brought directly or indirectly into relation with measuring Rod of money”. – Hicks.
(c) “Economics is the Science which studies human behaviour as a relationship between ends
and scares means which have alternative uses.” – Robbins
(d) Economics as a Science of Dynamic Growth and Development. – A.C. Pigou
102. Which of the following falls under Micro Economics ?
(a) National Income (b) General Price level
(c) Factor Pricing (d) National Saving and Investment

103. Which of the following steps relates only to deductive method in Economics?
(a) Testing of Hypothesis (b) Collection of data
(c) Classification of data (d) Perception of the problem
104. Broad Money refers to:
(a) M1 (b) M2
(c) M3 (d) M4
105. Monetary policy means:
(a) Policy relating to non-banking financial institution
(b) Policy relating to public revenue and public expenditure
(c) Policy relating to money and banking in a country
(d) All of the above.
106. W.T.O. was established on:
(a) 1st Jan 1991 (b) 2nd March 1992
(c) 1st Jan 1995 (d) 2nd March 1997
107. When indifference curve is L shaped then two goods will be:
(a) Perfect substitute Goods (b) Substitute Goods
(c) Perfect complementary goods (d) Complementary goods
108. If a point on a demand curve of any commodity lies on X Axis then price elasticity of demand
of that commodity at that point will be : __________
(a) Infinite (b) More than zero
(c) Less than zero (d) zero
109. Which of the following statement is incorrect ?
(a) Indian tax structure relies on a very narrow population base
(b) Direct taxes are differential, indirect taxes are progressive in nature
(c) The ratio of Direct taxes to indirect taxes which was 40:60 in 1951 declined to 20:80 in
1991
(d) The total tax revenue is highly insufficient to meet the expenditure requirement of the
economy
110. Which of the following statements about Central Bank is incorrect?
(a) Central bank regulates currency in accordance with the requirements of business and the
general public
(b) Central banks performs general banking and agency service for the state
(c) Central bank generally deals with the public and tries to encourage saving habits among
people

111. Structural unemployment results due to:

(a) A change caused by the introduction of new machines, labour saving devices and
improvement in methods of production
(b) A change caused by recessionary and depressionary phases of the economy
(c) A change caused by high population growth, primitive state of technology, low capital
formation and vicious circle of poverty etc.
(d) A change caused by a decline in demand for production in particular industry and consequent
disinvestments and reduction in its manpower requirement
112. Which of the following statements is correct about under utilization of capacity of industries
in India?
(a) The magnitude of under-utilisation varies from 20% to 60% in different industrial sectors
(b) The average under-utilization being in the region of 40% to 50%
(c) Over optimistic demand projection is one of the factors responsible for under utilization
in industries
113. Marginal cost is defined as
(a) The change in output due to a one unit change in output
(b) Total cost divided by output
(c) The change in total cost due to one unit change in output
(d) Total revenue divided by the quantity of input
114. If as a result of a change in price, the quantity supplied of a good remains unchanged, we
conclude that:
(a) Elasticity of supply is perfectly inelastic
(b) Elasticity of supply is relatively greater-elastic
(c) Elasticity of supply is inelastic
(d) Elasticity of supply is relatively less-elastic
115. One characteristic not typical of oligopolistic industry is:
(a) Too much importance to non-price competition
(b) Price leadership
(c) Horizontal demand curve
(d) A small number of firms in the industry
116. Which of the following statements is incorrect about the benefits of value added tax?
(a) Overall tax burden will be rationalized
(b) There is a provision of self-assessment
(c) Price will in general fall
(d) There will be less transparency

117. Balance of services is the sum of all invisible service receipts and payment which could
be ___________.
(a) Zero (b) Positive
(c) Negative (d) Zero, positive or negative
118. The cost of tax collection has increased from Rs. 543 crore in 1990-91 (Central Government)
to more than __________ in 2013-14.
(a) 4,500 crore (b) 8,500 crore
(c) 5,900 crore (d) 2,000 crore
119. If NNP figure is available at market prices we will ________ indirect taxes and ________
subsidies to the figure to get National Income of the economy.
(a) Add, subtract (b) Add, divide
(c) Subtract, add (d) Subtract, divide
120. At present CRR (Sept., 2014) is _______ and SLR is ________ for entire net demand and
time liabilities of the scheduled commercial banks.
(a) 10, 35 (b) 7, 30
(c) 4, 22 (d) 10, 25
121. India ranks _________ among the top fifteen debtor countries of the world 2012.
(a) Seventh (b) Third
(c) Ninth (d) Eighth
122. The National Highways now carry more than ________ percent of the total road traffic.
(a) 10 (b) 20
(c) 30 (d) 40
123. According to 1991 the sex ratio (females per 1000 males) was _________
(a) 929 (b) 729
(c) 927 (d) 933
124. The share of tertiary or services sector in GDP in 2013-14 was around___________
(a) 89 per cent (b) 39 per cent
(c) 49 per cent (d) 60 per cent
125. The Government established __________ in 1982 to finance rural projects at lower rate
of interests.
(a) Regional Rural Banks
(b) Reserve Bank of India
(c) National Bank for Agriculture and Rural Development
(d) Co-operative Banks

126. The percentage of people working in Agriculture sector came down to around ______
per cent in 2013-14.
(a) 40 (b) 60
(c) 49 (d) 70
127. The 10th plan targeted a reduction in infant mortality rate (IMR) to _______per 1000 by 2007
(a) 28 (b) 45
(c) 16.2 (d) 74
128. Nehru Rozgar Yojana, Urban Basic Services Programmes were merged with ___________
(a) NFFWP (b) SJSRY
(c) SGSY (d) PMGSY
129. Every ___________ person in the world is an Indian and every third poor person in the
world is also an Indian
(a) Tenth (b) Sixth
(c) Fourth (d) Ninth
130. Which programme was started in 2005 to provide electricity to villages?
(a) Mahatma Gandhi Electricity (b) Electricity for All
(c) Rajiv Gandhi Grameen Vidhutikaran (d) Indira gandhi Vidhutikaran
131. In a free market-economy, when consumer decrease their purchase of a good and the
level of _______ exceeds _________ then prices tend to fall.
(a) Prices, demand (b) Profits supply
(c) Demand supply (d) Supply, demand
132. At present, the responsibility for the provision of finance for Agriculture, Trade and small
industries has been handed over to:
(a) SBI (b) NABARD
(c) NABARD, SIDBI (d) NABARD, EXIM and SIDBI
Figure given below gives the PPC for producing two types of commodities X and Y. Read the
figure and answer questions 133-135

133. Which point in the above figure shows that the two commodities cannot be produced
with given technology?
(a) P (b) S
(c) Q (d) None of the above
134. Which point in above figure shows that the resources are not being utilized fully?
(a) P (b) Q
(c) S (d) R
135. Which point or points in above figure show that outputs are being produced at least cost
combination of resources?
(a) P (b) Both P and Q
(c) Q (d) Both R and S
136. What is privatization ?
(a) It refers to the disposal of private sector’s equity in the market
(b) It refers to the transfer of assets from public to private sector ownership
(c) It means integrating the domestic economy with the world economy
137. Which of the following is false about disinvestments?
(a) As a result, the total realization of the government from various rounds of disinvestments
has been much below the target
(b) The disinvestments was started in 1991-92
(c) Adequate efforts were not made to build up the much needed linkages between the public
enterprises and the capital market

A competitive firm sells as much as of its product it chooses at a market price of Rs. 100
per unit. Its fixed cost is Rs. 300 and its variable costs (in rupees) for different levels of
production are shown in the following table. Use table 1 to answer questions 138-141.
Table No.1
Qty. Variable Fixed Cost Total Cost Average Average Marginal

cost Varibale cost Total Cost Cost
0 0 – – – – –
5 270
10 490
15 720
20 1000
25 1370
30 1870
35 2540
40 3420
45 4550
50 5970
138. When production is 35 units, the average variable cost is: __________
(a) Rs. 7.25 (b) Rs. 72.25
(c) Rs. 72.57 (d) Rs. 85.50
139. In the table marginal cost per unit that corresponds to 25 units of production is
(a) Rs. 3.50 (b) Rs. 74
(c) Rs. 450 (d) Rs. 370
140. To maximize output, the firm should produce
(a) 30 (b) 35
(c) 45 (d) 50
141. If the market price drops from Rs. 100 to Rs. 74, the firm short run response should be:
__________
(a) Continue to produce the same number of units as before the drop in price
(b) Produce 10 units
(c) Produce 20 units
(d) Produce 25 units

Read the following data and answer Questions Number 142-147
XYZ are three commodities where X and Y are complements whereas X and Z are substitutes.
A shopkeeper sells commodity X at Rs. 40 per piece. At this price he is able to sell 100 pieces
of X per month. After some time he decreases the price of X to Rs. 20. Following the price
decrease :
He is able to sell 150 pieces of X per month
The demand for Y increases from 25 units to 50 units
The demand for commodity Z decreases from 150 to 75 units.
142. The price elasticity of demand when the price of X decreases from Rs. 40 per piece to Rs. 20
per piece will be equal to:
(a) 1.5 (b) 1.0
(c) 1.66 (d) 0.6
143. The cross elasticity of monthly demand for Y when the price of X decrease from Rs. 40 to Rs.
20 is equal to:
(a) +1 (b) –1
(c) –1.5 (d) +1.5
144. The cross-elasticity of Z when the price of X decreases from 40 to 20 is equal to:
(a) –0.6 (b) +0.6
(c) –1 (d) +1
145. What can be said about price elasticity of demand for X?
(a) Demand is unit elastic (b) Demand is highly elastic
(c) Demand is perfectly elastic (d) Demand is inelastic
146. Suppose income of the residents of locality increase by 50% and the quantity of X commodity
increases by 20%. What is income elasticity of demand for commodity X?
(a) 0.6 (b) 0.4
(c) 1.25 (d) 1.35
147. We can say that commodity X in economics is a/an
(a) luxury good (b) inferior Good
(c) normal Good (d) none of the above
148. If the total cost of manufacturing commodity ‘X’ is Rs. 1,50,000. Out of this implicit cost is
Rs. 55,000 and normal profit is Rs. 25,000, what will be explicit cost:
(a) Rs. 95,000 (b) Rs. 1,25,000
(c) Rs. 80,000 (d) Rs. 70,000

Use Table No.3 to Answer Questions 149 – 150
Unit of Labour Total Output Marginal Output

0 — —
1 500 500
2 — 430
3 1290 —
149. What is the total output when 2 units of labour are employed?
(a) 690 (b) 930
(c) 830 (d) 680
150. What is the marginal output of the third unit of labour?
(a) 390 (b) 380
(c) 370 (d) 360
SECTION – D : QUANTITATIVE APTITUDE (50 MARKS)
151. If one of the regression coefficient is greater than unity, then other is less than unity.
(a) True (b) False
(c) Both (d) None of these
152. The set of cubes of the natural number is
(a) A finite set (b) An infinite set
(c) As null set (d) None of these
153. Age of person is
(a) An attribute (b) A discrete variable
(c) A continuous variable (d) A variable
154. For open end classification, which of the following is the best measure of central tendency?
(a) A.M. (b) G.M.
(c) Median (d) Mode
155. When an event is decomposable into a number of simple events, then it is called a compound
event?
(a) True (b) False
156. In which case binomial distribution is not applicable if the value of variable is:
(a) 1.0 (b) 2.0
(c) 2.5 (d) None of these

157. “The number of suicides or death by heart attack in time t”,this is example of:
(a) Binomial distribution (b) Poisson distribution
(c) Probability distribution (d) None of these
158. To find out the operational cost, profit per unit of article, output per man etc, which measure
will be used by businessman?
(a) A.M. (b) G.M.
(c) Median (d) Mode
159. To find coefficient of correlation by scatter diagram method is not suitable, if the number of
observations is very large
(a) True (b) False
160. If an unbiased coin is tossed once, then the two events head and tail are:
(a) Mutually exclusive (b) Exhaustive
(c) Equally likely (d) All these
161. The value of log 6 216 6 is equal to
(a) 7/2 (b) 5/2

(c) 1 (d) None of these
162. For equation ax2+ bx+ c = 0, the sum of roots are equal to _______
(a) ac (b) – b/a
(c) c/a (d) None of these
log (1+ x)
163. lim is equal to ___________
x 0 x
(a) 0 (b) 1
(c) –1 (d) 
164. ______ terms will amount to 60 in the series 16+14+12 ……. nth term
(a) 4 (b) 3
(c) 5 (d) 11
165. The score of 10 students in a test with maximum marks 50 were as follows 28, 36, 34, 28, 48,
22, 35, 27, 19, 41, then variance is equal to _____________
(a) 69.16 (b) 59.16
(c) 49.61 (d) 79.61

166. A bag contains 20 discs numbered 1 to 20. A disc is drawn from the bag. The probability
that the number on it is a multiple of 3 is _______
(a) 5/10 (b) 2/5
(c) 1/5 (d) 3/10
167. 7 distinct things are to be divided in 3 groups, consisting of 2, 2 and 3 things respectively,
number of ways this can be done is equal to ___________
(a) 110 (b) 105
168. If the value of a car gets depreciated by 20% per year, estimated value at the end of five year
is ______ , if its present value is Rs. 24,000.
(a) 7,864.32 (b) 7,684.23
(c) 8,764.32 (d) 6,789.32
169. The shape and location of a _________ changes as p changes for a given n or n changes for a
given p.
(a) Poisson distribution (b) Binomial distribution
(c) Probability distribution (d) None of these
170. The median of the following items, 6, 10, 4, 3, 9 11, 22, 18 is ______________
(a) 10 (b) 9
(c) 9.5 (d) 10.5
171. Find the value of the f(-1), the function given below is continuous at x = -1
f ( x) = { x+1 }
x 2 – 2x – 3
, for x  – 1 ; The value of f ( – 1) is
(a) 1 (b) –1
(c) -4 (d) None of these
d
172. (x -1)(x - 2) is equal to
dx
(a) 2x-3 (b) 3x-2
173. The value of 2 + 2 + 2 is equal to
(a) -2 (b) 2
(c) 2 (d) 0

174. If ratio of second to seventh terms in an A.P., where first term is –7 is 1/7. Find the
common difference.
(a) 10 (b) 42
(c) 12 (d) 13
175. In how many ways 5 gents and 5 ladies sit at a round table; if no two ladies are to sit together.
(a) 720 (b) 120
(c) 2,880 (d) 34,600
3 1
176. If f(x) = x + , then value of f(x) – f (1/x) is equal to
x3
(a) 0 (b) 1
1
(c) x3  (d) None of these
x3
177. The points A (7,3) and C (0,-4) are two opposite vertices of a rhombus ABCD. Find the
equation of diagonal AC.
(a) 2x + 2y – 3 = 0 (b) x–y+3=0
(c) y– x + 4 = 0 (d) None of these
178. In a group of persons, average weight is 60 kg. If the average weight of males and females
taken separately is 80 kg and 50 kg respectively, find the ratio of the number of males to that
of females.
(a) 2:3 (b)3:2
(c) 2:1 (d)1:2
dx
179.  x  x is equal to
(a) 2 log (1+ x ) + K (b) log (1+) + K

(c) log + K (d) None of these
180. Find the sum of first twenty five terms of A.P. series whose nth term is .
(a) 105 (b) 115
(c) 125 (d) 135
181. The difference between compound interest and simple interest on a certain sum for 3 years
at 5% per annum is Rs. 76.25. Find the sum.
(a) Rs. 5,000 (b) Rs. 8,000
(c) Rs. 9,000 (d) Rs. 10,000

182. A bag contains Rs. 187 in the form of 1 Rupees, 50 Paise, and 10 Paise coins in the ratio
of 3:4:5. Find the number of each type of coins?
(a) 30, 40, 50 (b) 102, 136, 170
(c) 60, 80, 100 (d) None of these
183. The relation ‘Is a factor of’ is the set of integers is symmetric relation.
(a) True (b) False
184. If one of the number is 3 less than twice the other number and sum of squares of the two
numbers is 233. Find the numbers.
(a) 8, 13 (b) 11, 14
(c) 15, 18 (d) None of these
185. Find the present value of an ordinary annuity of 8 quarterly payments of Rs. 500 each, the
rate of interest being 8% p.a. compound quarterly.
(a) 4,275.00 (b) Rs. 4,725.00
(c) 3,662.50 (d) Rs. 3,266.50
186. Out of numbers 1 to 120, one is related at random, what is the probability that it is divisible
by 8 or 10.
(a) 23/120 (b) 18/125
(c) 32/120 (d) None of these
187. 3% of a given lot of manufactured parts are defective, what is the probability that in a
sample of 4 items none will be defective.
(a) 0.585 (b) 0.885
188. The marks obtained by 10 students in an examinations were as follows:
70, 65, 68, 70, 75, 73, 80, 70, 83, 86. Find mean deviation about the mean?
(a) 5.3 (b) 5.4

(c) 5.5 (d) 5.6
189. For a set of 100 observations, taking assumed mean as 4, the sum of the deviations is –
11 cm and the sum of squares of these deviations is 257 cm2 . Find the coefficient of
variation?
(a) 41.13% (b) 14.13%
(c) 25.13% (d) 52.13%

190. The coefficient of rank correlation of marks obtained by 10 students in English and
Economics was found to be 0.5, it was later discovered that the difference in ranks in the
two subjects obtained by one student was wrongly taken as 3 instead of 7. Find correct
coefficient of rank correlation.
(a) 0.514 (b) 0.26
191. The mean of normal distribution is 500 and 16% of the values are greater than 600. What is
the S.D. of the distribution.
(a) 50 (b) 100
(c) 150 (d) 200
192. A population comprises 3 numbers 2, 6, 4. Find all possible number of samples of size two
with replacement.
(a) 27 (b) 6
193. A random sample of 100 articles taken from a large batch of articles contains 15 defective
articles. What is the estimates of the proportion of defective articles in the entire batch.
(a) 0.15 (b) 0.020
194. How many numbers greater than 2000 can be formed with the digits 1, 2,3,4,5?
(a) 216 (b) 120
(c) 24 (d) 240
195. If 2x + 5y – 9=0 and 3x-y-5=0 are two regression equation, then find the value of mean of x
and mean of y.
(a) 1,2 (b) 2,2
(c) 2,1 (d) 1,1
196. If A = {4, 5}, B = {2, 3}, C = {5, 6} then AX B  C is
(a) {(2, 5), (3, 5)} (b) {(4, 2), (4, 6)}
(c) {(4, 3), (4, 2)} (d) None of these
ex - e2
197. lim
x  2 x - 2 is equal to:
(a) e2 (b) e
(c) 1 (d) 0

198. If 3 times of Ramesh’s age 6 years ago be subtracted from twice his present age, the
result would be equal to his present age. Find Ramesh’s age
(a) 15 (b) 9
(c) 16 (d) 8
199. The sum and product of the equation 3x2 – 2x – 6 = 0 are
(a) 2/3, –2 (b) –2/3, 2
(c) 2, –2/3 (d) –2, –2/3
200. If 1176 = 2p .3q .7r Find the value of p, q, r..
(a) 1, 2, 3 (b) 1, 3, 2
(c) 3, 1, 2 (d) 1, 3, 5


BOARD OF STUDIES
1. All the following are functions of accounting except

(a) Decision making (b) Measurement
(c) Forecasting (d) Ledger posting
2. Rs. 25,000 incurred on structural alterations to existing asset whereby its revenue earning
capacity is increased is _______
(a) Capital expenditure (b) Deferred revenue expenditure
(c) Revenue expenditure (d) None of the above
3. Debts written off as bad if recovered subsequently are
(a) Credited to Bad Debt recovered A/c
(b) Debited to Profit and Loss A/c
(c) Credited to Trade Receivables A/c
4. The total of the sales return book is posted periodically to the debit of _____
(a) Sales Return Account (b) Cash Book
(c) Journal proper (d) None of the above
5. Bills payable is ______
(a) Real A/c (b) Nominal A/c
(c) Personal A/c (d) Both (a) and (b)
6. Human assets have no place in accounting records is based on _____
(a) Money measurement concept (b) Accrual concept
(c) Consistency (d) Conservatism

7. Sales return book records _______

(a) Credit sales return (b) Cash sales return
(c) Both (a) and (b) (d) Purchase return
8. For calculation of goodwill as per Average profit method:
(a) No. of years purchased is multiplied with Super profit.
(b) No. of years purchased is multiplied with Average profit.
(c) Present value of Re 1 for number of years at specified rate is multiplied with super profit
of the year.
(d) Super profit is divided with expected rate of return.
9. Rent Account is:
(a) Personal A/c (b) Real A/c
(c) Nominal A/c (d) None of the above
10. Parties to Bill of Exchange are:
(a) Drawer (b) Drawee
(c) Payee (d) All of the above
11. An economic event that involves transfer of money or money’s worth is-
(a) Financial transaction (b) Barter
(c) Settlement (d) None of the above
12. Income is reflected in the form of –
(a) Inflow of assets or incurrence of liabilities. (b) Outflow of assets or decrease of liabilities.
(c) Inflow of assets or decrease of liabilities. (d) Outflow of assets or incurrence of liabilities.
13. Following are the factors which affects goodwill except:
(a) Nature of business. (b) Efficiency of management.
(c) Technical know-how. (d) Location of customers.
14. Profit and loss on revaluation is shared among the partners in ________ ratio.
(a) Old profit sharing ratio (b) New profit sharing ratio
(c) Capital ratio (d) Equal ratio
15. Which one of the following is correct-
(a) The term “Purchases” includes the purchases of fixed assets for cash as well as on .
(b) The term “Sales” includes the sales of fixed assets for cash as well as on credit.
(c) The term “Opening inventory” means the goods lying unsold at the end of previous accounting
period.
(d) The term “Closing inventory” means the goods lying unsold at the beginning of current
accounting period.

16. A, B & C entered into a partnership sharing profits & losses at the ratio of 5:3:2. A
retired & B and C agreed to share profits & losses in the ratio of 3:2. General reserve
balance was Rs 10,000. Balance of general reserve will be transferred to partners’ capital
accounts in the ratio of:
(a) 5:3:2 (b) 3:2
(c) 1:1:1 (d) None of the above
17. Depreciation on machinery in trial balance is recorded in ____________
(a) Trading A/c (b) Profit & Loss A/c
(c) Balance Sheet (d) None of the three
18. A cheque of Rs. 2,500 received for loss of inventory by fire has been deposited by
proprietor into his private bank account and has not recorded in the business book. The
rectifying entry will be
(a) Bank A/c Dr. 2,500
To Insurance company A/c 2,500
(b) Insurance company A/c Dr. 2,500
To Drawings A/c 2,500
(c) Drawings A/c Dr. 2,500
To Insurance company A/c 2,500
(d) Drawings A/c Dr. 2,500
To Bank A/c 2,500
19. Fixed capital A/c is credited with _______
(a) Interest on capital (b) Profit of the year
(c) Salary of the partner (d) None of the above.
20. Interest on drawing is ______ for the business
(a) Capital (b) Expense
(c) Gain (d) None of the three
21. Ramesh, the acceptor of the bill has to honour a bill on 31st March 2010. Due to financial
crisis, he is unable to pay the amount of bill of Rs. 20,000. Therefore, he approaches Ram on
20th March 2010 for extension of the bill for further 3 months. Ram agrees to extend the
credit period by drawing a new bill for Rs. 20,500 together with interest of Rs. 1000 in cash.
In this case old bill of Rs. 20,000 will be considered as:
(a) Discounted (b) Dishonoured
(c) Cancelled (d) Retired
22. M/s Kapoor Bros, which was registered in the year 2000, has been following straight line
method (SLM) of depreciation. In the current year it changed its method from SLM to
written down value (WDV) method, since such change would result in the additional
depreciation of Rs. 200 lakhs as a result of which the firm would qualify to be declared as
a sick industrial unit. The auditor raised objection to this change in the method of
depreciation.

Auditors objection is justified because -

(a) Change in the method of depreciation should be done only with the consent of the auditor.
(b) Depreciation method can be changed only from WDV to SLM and not Vice Versa.
(c) Change in the method of depreciation should be done only if it is required by some statute
and change would result in appropriate presentation of financial statement.
(d) Method of depreciation cannot be changed under any circumstances.
23. A company purchased a plant for Rs. 5,000 useful life of the plant is 10 years and residual
value is Rs. 500. Rate of depreciation will be ____
(a) 9% (b) 10%
(c) 15% (d) 12½%
Rs.
24. Gross Profit 51,000
Carriage Outwards 5,800
Rent paid 6,400
Bad Debts 2,600
Apprentice premium (Cr.) 1,500
Printing & Stationery 1,000
Net profit of the firm will be
(a) Rs. 38,900 (b) Rs. 36,700
(c) Rs. 35,000 (d) Rs. 40,000
25. A started business with Rs. 10,000 cash and Rs. 2,000 furniture. Sales amounted to
Rs. 50,000 including Rs. 5,000 cash sale. Rs. 10,000 sales were outstanding at the end of the
year. Purchases amounted to Rs. 30,000 including Rs. 10,000 cash purchase. Rs. 15,000
has been paid to suppliers. Expenses paid during the year are Rs. 19,300. Cash balance
at the end will be _________
(a) Rs. 6,000 (b) Rs. 7,000
(c) Rs. 5,700 (d) Rs. 5,000
26. On Jan 1, 2010 Ram Gopal invested Capital of Rs. 50,000. He withdrew Rs. 2,000 on the
first day of each month interest on drawings is provided @ 10%. The amount of interest
on drawings deducted from Capital will be _________
(a) Rs. 1,300 (b) Rs. 1,400
(c) Rs. 1,500 (d) Rs. 1,000
27. Received one bill from A Rs. 500 passed through B/P book. The rectifying entry will be_
Rs. Rs.
(a) A Dr. 500
To B/P 500
(b) B/R A/c Dr. 500
To A 500
(c) B/P A/c Dr. 500
B/R A/c Dr. 500
To A 1000

28. Goods costing Rs. 7,500 were sold at 25% profit on selling price. The sales will be of :
(a) Rs. 10,000 (b) Rs. 9,000
29. Following figures have been taken from the books of a trader
Purchases 3,00,000
Purchase Returns 6,000
Sales 4,10,000
Sales Returns 10,000
Opening inventory 80,000
Carriage & Freight 12,000
Duty & Clearing Charges 4,000
Wages 8,000
Gross profit will be ________
(a) Rs. 60,000 (b) Rs. 61,000
(c) Rs. 62,000 (d) Rs. 65,000
30. Trial Balance containing obvious errors is given below:
Dr. (Rs.) Cr. (Rs.)

Purchases 60,000
Reserve Fund 20,000
Sales 1,00,000
Purchase return 1,000
Sales Return 2,000
Opening Inventory 30,000
Closing Inventory 40,000
Sundry Expenses 20,000
Outstanding Expenses 2,000
Cash at Bank 5,000
Fixed Assets 50,000
Trade receivables 80,000
Trade payables 30,000
Capital 94,000
Suspense A/c 10,000
2,72,000 2,72,000

Total of corrected trial balance will be ________

(a) Rs. 2,40,000 (b) Rs. 2,47,000
(c) Rs. 2,50,000 (d) Rs. 2,38,000
31. Bank overdraft as per Cash book is Rs. 2500
Cheque deposited but not cleared Rs.1000
Cheque issued but not cashed Rs.1400
Bank overdraft as per Bank statement will be ________
(a) Rs. 2,000 (b) Rs. 2,100

(c) Rs. 2,500 (d) Rs. 2,200
32. Mr. Y followed WDV Method and SLM Method of Depreciation during 2006 and
2007 respectively. He has violated-
(a) Conservatism Principle (b) Materiality Principle
(c) Cost Principle (d) Consistency Principle
33. Following are the details of position statement

Rs. Rs.
Closing Inventory 40,000 Cash 3,000
Drawings 12,000 Bills receivable 5,000
Net Profit 18,000 Bills payable 3,000
Capital 70,000 Machinery 20,000
Debtors 40,000 Depreciation provision 4,000
Cash at Bank 8,000 Liabilities for expenses 3,000
Creditors 30,000
Balance sheet total will be:
(a) Rs. 1,16,000 (b) Rs. 1,15,000
(c) Rs. 1,20,000 (d) Rs. 1,25,000
34. Panna Lal sends 100 sewing machines on consignment to Ram Ji Lal. The cost of each
machine is Rs. 150. Panna Lal spends Rs. 500 on packing and dispatch. Ram Ji Lal receives
the consignment and informed that 90 machines have been sold at Rs. 180 each. Expenses
paid by Ram Ji Lal are freight Rs. 500, carriage and octroi Rs. 200, Godown rent Rs. 100
and insurance Rs. 150. Ram Ji Lal is entitled to a commission of 7½% on sales. Profit on
consignment will be:
(a) Rs. 150 (b) Rs. 155
(c) Rs. 200 (d) Rs. 160
35. Bharti consigned to Bhawna 1,500 Kg of flour costing Rs. 4500. She spent Rs. 307 as
forwarding charges. 5% of the consignment was lost in weighing and handling. Bhawna
sold 1,350 Kg of flour at Rs. 4 per kg. Her selling expenses being Rs. 550 and commission
at 12½% on sales. Valuation of closing inventory will be ________

(a) Rs. 253 (b) Rs. 250
(c) Rs. 350 (d) Rs. 275
36. Which of the following is not a current asset?
(a) Bills Receivable (b) Inventory
(c) Trade receivables (d) Furniture and Fittings
37. Deepak Ltd. forfeited 40 shares of 100 each (Rs. 60 called up) issued at par to Mukesh
on which he had paid Rs. 20 per share. Out of these 30 shares were reissued to Sujoy as
Rs. 60 paid up for Rs. 45 per share. Amount transferred to capital reserve will be ________
(a) Rs. 150 (b) Rs. 100
(c) Rs. 200 (d) Rs. 120
38. The following information pertains to Quick Ltd.
Rs.
(i) Equity share capital called up 10,00,000
(ii) Calls in arrear 40,000
(iii) Calls in advance 25,000
(iv) Proposed dividend 5%
The amount of dividend payable is ________
(a) Rs. 48,000 (b) Rs. 50,000
(c) Rs. 60,000 (d) Rs. 49,250
39. Which of the following is fixed asset?

(a) Plant and machinery (b) Inventory
(c) Trade receivables (d) Cash
40. Ram Ltd. re-issued 200 equity shares of Rs.10 each @ Rs. 7 per share (Rs. 2 originally
paid up). Amount of net loss on re-issue of shares will be
(a) Rs. 300 (b) Rs. 200
(c) Rs. 400 (d) Rs. 500
41. A company purchased machinery for Rs. 20,000 on 1st January 2006 and followed the
diminishing balance method @ 15%. At the end of 2009 it was decided to follow fixed
Instalment method of depreciating the machine at Rs. 3000 per year from the very
beginning and the necessary amount of unabsorbed depreciation of 2006 to 2008 to be
adjusted in 2009. Adjusted amount will be: _________
(a) Rs. 1,282 (b) Rs. 1,300
(c) Rs. 1,400 (d) Rs. 1,500
42. On 1st April, 2009 M/s Omega Bros. had a provision for bad debts of Rs. 6,500. During
2009-2010 Rs. 4,200 proved irrecoverable and it was desired to maintain the provision
for bad debts @ 4% on trade receivables which stood at Rs. 1,95,000 before writing off

bad debts. Amount of net provision debited to profit and loss A/c will be: _________
(a) Rs. 7,800 (b) Rs. 7,500
(c) Rs. 5,332 (d) Rs. 5,000
43. Following figures have been taken from the books of a trader
Rs.
Purchases 60,000
Purchase returns 10,000
Sales 80,000
Sales Return 10,000
Carriage outwards 1,000
Office Rent 1,000
Amount of Gross Profit will be _________
(a) Rs. 20,000 (b) Rs.10,000

(c) Rs.15,000 (d) None of the three
44. The profits for the last four years are given as follows:
Year Rs.
2006 40,000
2007 50,000
2008 60,000
2009 50,000
The value of goodwill on the basis of three years purchase of average profits based on last
four years will be _________
(a) Rs. 1,00,000 (b) Rs. 1,50,000

(c) Rs. 2,00,000 (d) None of three
45. Goods destroyed by fire Rs. 50,000 and Insurance company admitted 60% claim. This
adjustment will be entered in:
(a) Trading Account (b) Profit & Loss Account
(c) Balance Sheet (d) All the three
46. Following balances are given in trial balance
Dr. Rs. Cr. Rs.
6% Loan on (1.1.2009) 10,000
Interest on Loan 300
Interest payable and outstanding will be: _________
(a) Rs. 600 (b) Rs. 300
(c) Rs. 500 (d) Rs. 700

47. Machinery bought on 1st July 2006 for Rs. 20,000 was sold on Dec. 31, 2009 for
Rs. 15,000. Depreciation is charged @ 10% p.a. on original cost. Accounting year closes on
31st December each year. Profit on sale will be _________
(a) Rs. 3,000 (b) Rs. 2,000
(c) Rs. 2,500 (d) Rs. 4,000
48. A boiler was purchased from abroad for Rs. 10,000, shipping and forwarding charges
amounted to Rs. 2,000, Import duty Rs. 7,000 and expenses of installation amounted to
Rs. 1,000. It was depreciated for three years @ 10% on diminishing balance method, Balance of
machinery A/c at the end of third year will be _____
(a) Rs. 14,580 (b) Rs. 15,000
(c) Rs. 14,000 (d) Rs. 15,500
49. Syam prepared a trial balance for his factory on 31st March, 2010. The debit total of trial
balance was short by Rs. 500. He transferred the deficiency to suspense A/c. After a close
examination he found that the purchase day book for Sept. 2009 was undercast by
Rs. 500. Necessary Journal entry to rectify the error will be:
Rs. Rs.
(a) Purchases A/c Dr. 500
To Cash A/c 500
(b) Suspense A/c Dr. 500
To Purchases A/c 500
(c) Purchases A/c Dr. 500
To Suspense 500
50. Which of the following errors will effect the trial balance?
(a) Repairs to building wrongly debited to Building A/c
(b) Total of purchase Journal is short by Rs. 1,000
(c) Freight paid on purchase of new machinery debited to freight account.
51. A’s acceptance to B for Rs. 8,000 renewed for 3 months on the condition that
Rs. 4,000 be paid in cash immediately and the remaining amount will carry interest @
12% p.a. The amount of interest will be
(a) Rs. 120 (b) Rs. 100
(c) Rs. 80 (d) Rs. 160
52. A Limited Company purchased machine worth Rs. 1,15,000 from Indian Traders. Payment
was made as to Rs. 10,000 by cross cheque and the remaining amount by issue of Equity
Shares of the face value of Rs. 10 each fully paid at an issue price of Rs. 10.50 each.
Amount of securities premium will be
(a) Rs. 6,000 (b) Rs. 7,000
(c) Rs. 5,000 (d) Rs. 4,000

53. B sold 50 televisions at Rs. 15,000 per television. He was entitled to commission of
Rs. 500 per television sold plus one fourth of the amount by which the gross sale proceeds
less total commission there on exceeded a sum calculated at the rate of Rs. 12,500 per
television sold. Amount of commission will be
(a) Rs. 45,000 (b) Rs. 50,000
(c) Rs. 40,000 (d) Rs. 35,000
54. On 16.06.2010, X draws a bill on Y for Rs. 25,000 for 30 days. July 19th is a public holiday.
The maturity date of the bill will be _________
(a) 19th July, 2010 (b) 18th July, 2010
(c) 20th July, 2010 (d) 16th July, 2010
55. A and B entered into a joint venture and agreed to share profits and losses in the ratio of 3:2.
A Joint Bank A/c was opened where in A contributed Rs. 50,000 and B contributed
Rs. 20,000. Their transactions were as follows:
Rs.
Material Purchased 65,000
Wages paid 6,000
Administrative expenses paid by B 3,000
Selling expenses 6,170
Expenses paid by A 1,630
Sales 1,12,000
Remaining inventory was taken by A for Rs. 6,200. Joint venture profit will be
(a) Rs. 36,000 (b) Rs. 36,400
(c) Rs. 35,000 (d) Rs. 36,500
56. The expired portion of capital expenditure is
(a) Expense (b) Income
(c) Asset (d) Liability
57. Rs.
Capital on January 1, 2009 15,200
Capital on January 1, 2010 16,900
Drawings made during the year 4,800
Additional Capital introduced during the year 2,000
Profit of the firm will be
(a) Rs. 4,500 (b) Rs. 4,000

(c) Rs. 4,800 (d) Rs. 5,000
58. In the bank reconciliation statement, when balance as per cash book is taken as the starting
point, then interest collected by bank Rs. 500 and direct deposit by a customer into his
bank Rs. 2,500 will be:
(a) Added (b) Subtracted
(c) Ignored (d) None of the above

59. Recovery of bad debts is a
(a) Revenue receipt (b) Capital receipt
(c) Capital expenditure (d) Revenue expenditure
60. A draws a bill on B for Rs. 50,000 for mutual accommodation. A discounted the bill for
Rs. 48,000 from bank and remitted Rs. 24,000 to B. On maturity date, A will send to B
(a) Rs. 25,000 (b) Rs. 24,000
(c) Rs. 23,000 (d) Rs. 26,000
61. An agreement to do an impossible act is:

(a) Void (b) Voidable
(c) Illegal (d) None of these
62. A, B, and C jointly promised to pay Rs. 50,000 to D on the performance of the contract. C
dies. Here the contract
(a) Becomes void on C’s death
(b) Should be performed by A and B along with C’s legal representatives
(c) Should be performed by A and B alone
(d) Should be renewed between A, B, and D
63. In case of breach of contract, which of the following remedy is available to the aggrieved
party?
(a) Suit for rescission (b) Suit for damages
(c) Suit for specific performance (d) All of these
64. Which is true statement in voidable contract, the injured party
(a) Is entitled to recover compensation
(b) Has a right to sue for damages
(c) Has a right to rescinded the contract
(d) All of these
65. A contract can be discharged by operation of law by
(a) Death of promisor (b) By insolvency of promiser
(c) By Lunacy of promiser (d) By death or insolvency of promiser
66. Which does not relate with seller’s suits?
(a) Suit for price
(b) Suit for damages for non acceptance
(c) Suit for repudiation of contract by the buyer before due date
(d) Suit for taking back the goods

67. Future goods means goods to be manufactured or acquired by the seller.

(a) Before making the contract of sale (b) At the time of contract of sale
(c) After making the contract by sale (d) All of these
68. Where seller refuses to deliver the goods to the buyer
(a) The buyer many sue the seller for damages for non-delivery
(b) The buyer may not sue the seller
(c) The buyer may compel the seller to deliver the goods
(d) The buyer may not compel the seller to deliver the goods
69. Which of seller’s right against the buyer in case of breach of contract is:
(a) Suit for price and damages for non-acceptance
(b) Suit for damages for non-acceptance
(c) Suit for price only
(d) Cannot sue for price and damages
70. Which of the statement is true in case of an auction sale
(a) The sale is complete when the auctioneer announces its completion by the fall of hammer
(b) The sale is complete after certain period
(c) The sale is complete after five hours
(d) The sale is complete after eight hours
71. Who cannot become a partner in partnership firm
(a) A competent person (b) An unmarried woman
(c) Non-resident Indian (d) Alien enemy
72. A Joint Hindu family arises
(a) From status decided by court (b) As a result of an agreement
(c) By operation of law (d) All of these
73. In partnership the liability of the partner is:
(a) Limited to share in partner ship firm
(b) Unlimited
(c) Decided by court
(d) Decided by other partners
74. The Sale of Goods Act, 1930 gives the remedies to a seller for breach of contract of sale.
Which is correct.
(a) Suit for price
(b) Suit for damages for non-acceptance
(c) Suit for damages for reputation of contract by the buyer before due date
(d) All of these

75. The term goods includes
(a) Stocks and shares (b) Money
(c) Actionable claim (d) All of these
76. The partnership agreement may be: _________
(a) Express or implied (b) Only written
(c) Oral only (d) Implied only
77. The term business includes _________
(a) Every trade (b) Every occupation
(c) Profession only (d) All of these
78. Which is the true statement regarding the inclusion of minor in partnership firm
(a) A minor may be admitted to the benefits of partnership with the consent of all other partners.
(b) A minor may be admitted to the benefits of partnership with no consent of other partners
(c) A minor may be admitted to the benefits of partnership with the consent of his parents
(d) A minor may be admitted to the benefits of partnership with the guarantee of his parents
79. In case of partnership, registration of firm is:
(a) Compulsory
(b) Not necessary
(c) Compulsory if the court orders to do so
(d) Compulsory if the government thinks fit to do so
80. There may be ____________ condition
(a) Implied (b) Express
(c) Implied and Express both (d) None of these
81. Under the doctrine of Caveat Emptor the seller is _____________
(a) Responsible for bad selection of goods by the buyer
(b) Not responsible for the bad selection of goods by the buyer
(c) Both of these
(d) None of these
82. The unpaid seller loses the right of lien
(a) Where seller waived the right of lien
(b) By estoppel
(c) Where the buyer obtains possession of goods
(d) Any of the above

83. If the seller hands over the key to the buyer of warehouse containing the goods, the
delivery is known as
(a) Constructive delivery (b) Actual delivery
(c) Symbolic delivery (d) No delivery
84. In a hire purchase agreement the hirer ___________
(a) Has an option to buy the goods
(b) Must buy the goods
(c) Must return the goods
(d) Is not given the possession of goods
85. In case of goods sold by sample, the goods should correspond with the sample otherwise
______
(a) Buyer can reject the goods (b) Buyer cannot reject the goods
(c) Contract is terminated (d) Seller is liable to punishment
86. Voluntary transfer of possession by one person to another is known as _________
(a) Transfer (b) Possession
(c) Delivery (d) None of these
87. In a joint family business there should be _____________ members
(a) Maximum 20
(b) Unlimited
(c) No. of persons decided by the government
(d) Maximum 10
88. An unregistered firm _____________
(a) Cannot sue a third party
(b) The third party can sue the firm
(c) The partners cannot sue the firm
(d) A partner cannot sue to any other partner
89. Every partner has ____________
(a) A right to inspect the books of the firm
(b) No right to inspect the books of the firm
(c) A right with the consent of other partners to inspect the books
(d) A right to inspect the books with the consent of the Registrar
90. If claim on interest on capital is called, it is payable only out of
(a) Profit (b) Turnover
(c) Capital (d) Assets

91. In absence of specific agreement partner is entitled to interest at the rate of ____________
an advances made for the purpose of business of the firm
(a) 6% (b) 10%
(c) 8% (d) 12%
92. The partners cannot be expelled from the firm by ______________
(a) Majority of partners (b) Court
(c) Government (d) Two partners
93. A partner is
(a) Not entitled to receive any remuneration
(b) Entitled to receive remuneration with the consent of other partners
(c) Entitled to receive remuneration by order of the court
(d) Entitled to receive remuneration
94. Goodwill is ______________
(a) Tangible asset (b) Liquid Asset
(c) Fixed Asset (d) Intangible Asset
95. When a partner agrees to share his profits derived from the firm with a third person, that
third person is known as ____________
(a) Sleeping partner (b) Nominal Partner
(c) Sub-Partner (d) No partner
96. On attaining majority the minor partner has to decide within ______ whether he shall
continue in the firm or leave it.
(a) 6 months (b) 12 months
(c) 3 months (d) 1 month
97. A partner may retire from a firm ___________
(a) With the consent of all other partners
(b) With the consent by sleeping partner
(c) With the consent of main partner
(d) No consent of any partner
98. Where a partner in a firm is adjudicated insolvent
(a) He ceases to be a partner
(b) He does not cease to be a partner
(c) He ceases to be a partner with the consent of all other partner
(d) He ceases to be a partner by order of the court

99. ‘A’, a man enfeebled by disease is induced by B’s influence over him as his medical
attendant, to agree to pay ‘B’ an unreasonable sum for his services. It is the case of :
(a) Undue Influence (b) Coercion
(c) Fraud (d) Mistake
100. ‘A’ contracts to sing for ‘B’ at a concert for Rs. 5,000, which is paid in advance, ‘A’ is too ill
to sing. Decide best
(a) A must refund the advance of Rs. 5,000 to B
(b) A is not liable to refund the many
(c) ‘B’ should force ‘A’ to sing
(d) ‘A’ is liable to refund only 50% of advance money to B
101. Who is the main exponent of Marginal utility analysis ?

(a) Paul Samuelson (b) Hicks
(c) Keynes (d) Marshall
102. Cardinal measure of utility is required in:
(a) Marginal Utility theory (b) Indifference curve
(c) Revealed preference (d) None
103. In case of inferior goods, income elasticity is :
(a) zero (b) positive
(c) negative (d) none
104. In case of Giffen goods, demand curve will slope :
(a) upward (b) downward
(c) horizontal (d) vertical
105. Cross elasticity of demand between tea and coffee is:
(a) positive (b) negative
(c) zero (d) infinity
106. If all inputs are trebled and the resultant output is doubled, this is a case of:
(a) constant returns to scale (b) increasing returns to scale
(c) diminishing returns to scale (d) negative returns to scale
107. Indifference curve is downward slopping _______
(a) always (b) sometimes
(c) never (d) none of these

108. Demand curve can be derived from:
(a) MU curve (b) PCC
(c) Both (a) & (b) (d) None
109. The exception to law of demand are:
(a) Veblen goods (b) Giffen goods
(c) Both (a) & (b) (d) none
110. Under perfect competition price of the product :
(a) Can be controlled by individual firm
(b) Cannot be controlled by individual firm
(c) Can be controlled within certain limit by individual firm
111. In the case of monopoly:
(a) MR curve cannot be defined
(b) AR curve cannot be defined
(c) the short run supply curve cannot be defined
(d) none of the above
112. In case of monopoly a firm in the short run can have -
(a) Supernormal profits (b) Normal profits
(c) Losses (d) Any of the above
113. The upper portion of the kinked demand curve is relatively -
(a) More inelastic (b) More elastic
(c) Less elastic (d) Inelastic
114. Price leadership is a form of -
(a) Monopolistic competition (b) Monopoly
(c) Non-collusive Oligopoly (d) Perfect competition
115. Period in which supply cannot be increased is called -
(a) Market period (b) Short run
(c) Long run (d) None of these
116. Price discrimination is not possible in the case of
(a) Perfect competition (b) Monopoly
(c) Monopolistic competition (d) Nothing can be said
117. If the income elasticity is greater than one the commodity is -
(a) Necessity (b) Luxury
(c) Inferior goods (d) None of these

118. Full capacity is utilized only when there is -

(a) Monopoly (b) Perfect competition
(c) Price discrimination (d) Oligopoly
119. The ‘Diamond Water’ controversy is explained by -
(a) Total utility (b) Marginal utility
(c) Price offered (d) Quantity supplied
120. Which among the following is the drawback of consumer surplus (as explained in marginal
utility analysis)?
(a) it is highly hypothetical and imaginary
(b) it ignores the interdependence between the goods
(c) it cannot be measured in terms of money because marginal utility of money changes
(d) all of the above
121. Which of the following is a function of money?
(a) Medium of exchange (b) Store of value
(c) Transfer of value (d) All the above
122. Increase in money supply will lead to:
(a) Cost push inflation (b) Demand pull inflation
(c) Structural inflation (d) None of the above
123. Which of the following is a commercial bank in India?
(a) Axis (b) IFCI
(c) IBRD (d) SEBI
124. Banks are regulated by:
(a) Securities Exchange Board of India
(b) Reserve Bank of India
(c) Company Law Board
(d) Registrar of Companies
125. Monetary policy is formulated by :
(a) RBI (b) SEBI
(c) CLB (d) Finance Ministry
126. In case RBI wants to increase rate of interest then it should:
(a) sell securities (b) buy securities
(c) hold securities (d) none of the above

127. Major commercial banks of India were nationalized in
(a) 1969 (b) 1970
(c) 1971 (d) 1972
128. Commercial banks provide:
(a) loans (b) agency services
(c) both (a) & (b) (d) none of the above
129. Rationing of Credit takes place when:
(a) Demand for Credit is Zero
(b) Demand for Credit is higher than supply
(c) Demand for Credit is low
130. Statutory liquidity Ratio in India is: (Sept. 2014)
(a) 15% (b) 20%
(c) 22% (d) 30%
131. The cash reserve ratio is determined by :
(a) Free play of market forces (b) Commercial banks
(c) Monetary authority (d) None of the above
132. In India, fiscal year starts from
(a) 31st March (b) 31st April
(c) 1st April (d) 1st March
133. Which budget in India is passed separately?

(a) Defence (b) Airlines
(c) Atomic energy (d) Railways
134. Revenue deficit in India is -
(a) negative (b) positive
(c) zero (d) none of the above
135. VAT is levied by:
(a) Central government (b) State governments
(c) Local government (d) None of the above
136. Which of the following are sources of growth?
(a) Natural resources (b) Human capital
(c) Physical capital (d) All the above

137. In 2011, the population was more than :

(a) 100 crs. (b) 110 crs.
(c) 121 crs. (d) 105 crs.
138. The highest user of commercial energy is ________
(a) agriculture (b) industry
(c) transport (d) household
139. Consumer surplus means ________
(a) the area inside the budget line
(b) the area between the average revenue and marginal revenue curves
(c) the difference between the maximum amount a person is willing to pay for a good and its
market price
140. A horizontal supply curve parallel to the quantity axis implies that the elasticity of the
supply is:
(a) zero (b) infinite
(c) equal to one (d) greater than zero but less than one
141. Increase in population can be caused by -
(a) High birth rate (b) Low death rate
(c) Immigration (d) All the above
142. Which of the following pairs of goods in an example of substitutes ?
(a) tea and sugar (b) tea and coffee
(c) tea and ball pen (d) tea and shirt
143. A firm encounters its shut down point when:
(a) Average cost equals price at the profit maximising level of output
(b) Average variable cost equals price at the profit maximising level of output
(c) Average fixed cost equals price at the profit maximising level of output
144. Manufacturing industries are a part of :
(a) primary sector (b) secondary sector
(c) tertiary sector (d) none of the above
145. Mark the correct statement -
(a) India is a purely capitalist economy
(b) India is a stagnant economy
(c) India is a developing economy
(d) India is a resources poor economy

146. Public sector in India suffers from:
(a) over staffing (b) political interference
(c) uncompetitiveness (d) all of the above
147. The Reserve Bank of India was set up in :
(a) 1949 (b) 1956
(c) 1935 (d) 1901
148. Disinvestment programme started in India after -
(a) 1986-87 (b) 1988-89
(c) 1991-92 (d) 1995-96
149. Liberalisation process in India was initiated by -
(a) Yashwant Singh (b) Manmohan Singh
(c) Jaswant Singh (d) Both (a) & (b)
150. First plan was initiated in:
(a) 1950 (b) 1951
(c) 1956 (d) 1962
151. A good estimator posses the following property

(a) Unbiasedness (b) Consistency
(c) Efficiency (d) All these
152. Frequency density is used in the construction of
(a) Histogram (b) Ogive
(c) Frequency polygon (d) None of these
153. Mean may lead to fallacious conditions in the absence of original observations
(a) True (b) False
154. Quartile deviation can be affected by:
(a) Poisson distribution (b) Binomial distribution
(c) Sampling fluctuations (d) None of these
155. The chart that was logarithm of the variable is known as
(a) Line chart (b) Ratio chart
(c) Multiple line chart (d) Component line chart

156. Which measure of dispersion has some desirable mathematical properties?

(a) Standard deviation (b) Mean deviation
(c) Quartile deviation (d) All these measure
157. The coefficient of correlation between two variables
(a) Can have any unit
(b) Is expressed as the product of units of two variable.
(c) Is a unit free measure
(d) None of these
158. If A and B are two mutually exclusive events, then P(AUB) = P (A) + P (B)
(a) True (b) False
(c) P(AUB) = P (A/B) (d) None of these
159. A function f(x) is an even function, if
(a) –f(x) = f(x) (b) f(–x) = f(x)
(c) f(–x) = –f(x) (d) None of these
160. In a circular test the _____________condition must be satisfied?
(a) P01 x P12 x P20 = 1 (b) P02 x P10 x P20 = 1
(c) P10 x P20 x P21 = 1 (d) None of these
161. If the same quantity is multiplied to all the values the mean shall ______ by the same amount.
(a) Add (b) Subtract
(c) Multiply (d) Divide
162. Probability of occurrence of A as well as B is denoted by _________
(a) P(AB) (b) P(A+B)
(c) P (A/B) (d) None of these
163. log64 512 is equal to
(a) 3 (b) 2
(c) 1 (d) 3/2
164. The fourth proportional to (a2– ab + b2), (a3 + b3) and (a-b) is equal to _________
(a) a 2 + b2 (b) a 2 – b2
165. The sum of series 4 , 0,– 4 ,–8……… ….100th terms is _____
(a) –19400 (b) –292
(c) –150 (d) –100

166. Number of arrangement that can be made by word ‘APPLE’ is _______
(a) 50 (b) 40
(c) 60 (d) 120
167. A person lend _______ at simple interest in order of getting Rs. 645 at the end of 1½ years @
5% p.a.
(a) Rs. 600 (b) Rs. 625
(c) Rs. 550 (d) Rs. 575
168. lim log(1+ x)1 x is equal to

x 0
(a) 1 (b) 0
(c) e (d) Does not exist
1
1
169.  log( x - 1)dx is equal to _______
0
(a) 1 (b) 0
(c) 2 (d) –1
170. A _______ estimate is a single number
(a) Point (b) Interval
171. Find the value of m, if one of root is –3/2 of the equation x2+x–m=0
(a) 1 (b) 0
(c) –3/4 (d) –2
172. Find two numbers such that mean proportional between them is 18 and third proportional
to them is 144.
(a) 9, 36 (b) 29, 56
173. A man has only 20 paise coins and 25 paise coins in his purse. If he has 50 coins in all
totalling Rs. 11.25, how many coins of each does he have
(a) 15, 35 (b) 25, 25
(c) 40, 10 (d) 30, 20
x
174. If a function in x is defined by f(x) = 2
, X  R then f(1/x) = ________
x +1
(a) f(x) (b) f(–x)

(c) –f(x) (d) 0

175. A line intersects x-axis at (–-2, 0) and cuts off an intercept of 3 from the positive side of
y-axis, the equation of line is
(a) 2x – 3y + 3 = 0 (b) 2x – 2y-3 = 0
(c) 3x – 2y + 6 = 0 (d) None of these
X 2 - 4x + 3
176. lim is equal to
x 1 X 2 - 6x + 5
(a) 1/5 (b) 3/5

(c) 1/2 (d) 0
177. Three horses A, B and C are in a race, A is twice as likely to win as B and B is twice as likely
to win as C. What is the possibility of C winning the race?
(a) 1/7 (b) 3/7
(c) 2/5 (d) 2/7
178. The mean annual salary of all employees in a company is Rs. 25,000. The mean salary of
male and female employees is Rs. 27,000 and Rs. 17,000 respectively. Find the percentage of
males and females employed by the company.
(a) 60% and 40% (b) 75% and 25%
(c) 70% and 30% (d) 80% and 20%
179. For the series 13, 14, 7, 12, 9, 17, 8, 10, 6, 15, 18, 20, 21 calculate third decile
(a) 9.2 (b) 9.5
180. After settlement the average weekly wage in a factory has increased from Rs. 8 to Rs. 12
and standard deviation has increased from 2 to 2.5. Find the coefficient of variation after
the settlement.
(a) 25% (b) 20.83%
(c) 24.0% (d) 26.30%
181. If r = 0.8, then coefficient of correlation shall be _________
(a) 0.64 (b) 0.40
(c) 0.60 (d) 0.80
182. A class consists of 10 boys and 20 girls of which half the boys and half the girls have blue
eyes. Find the probability that a student chosen random is a boy and has blue eyes.
(a) 1/6 (b) 3/5
(c) 1/2 (d) None of these
183. If x is a Poisson variate such that P(x=2) = 9P(x=4) + 90P(x=6), find mean of x.
(a) m=2 (b) m=1
(c) m=±1 (d) m = –4

184. If sample mean is 20, population standard deviation is 3 and sample size is 64, find the
interval estimate of the mean at confidence integral of 95%.
(a) [19.265, 20.735] (b) [19.801, 17.735]
(c) [20.735, 25.834] (d) None of these
185. A person invested money in bank paying 6% p.a. compounded semi annually. If the person
expects to receive Rs. 8000 in 6 years, what is the present value of investment.
(a) Rs. 5,000 (b) Rs. 4,611.03
(c) Rs. 5,611.03 (d) None of these
186. Out of 6 teachers and four boys, a committee of eight is to be formed. In how many ways can
this be done when there should not be less than four teachers in the committee.
(a) 45 (b) 55
(c) 30 (d) 50
3
2
187. Evaluate the value of  (3x
0
+ 5x + 2)dx
(a) 55 (b) 57
(c) 55.5 (d) 56
1 1
188. Evaluate lim ( - 2 )
x2 x - 2 x - 3x + 2
(a) 1 (b) 3
189. Find the second differential coefficient of y = x2 log x
(a) x + 2x log x (b) 3 + 2 log x
(c) 3 log x (d) 2x log x
x 2 + 3x + 2
190. Compute the value of lim ( )
x2 x 3 + 2x - x +1
(a) 5 (b) 9
(c) 7 (d) 2
191. If 3x = 2, 5y =3 and 2z =5, find the value of multiply of x.y.z
(a) 0 (b) 1
192. If f(x) = |x + 1| and g(x) = 3x2 – 2 – 5, find the value of g of = ?
(a) 3x2 + 6x –2 (b) 2x2 – 6x + 3
(c) | 3x2-5 | (d) x–5

4
(x + 1) (x + 4)
193. 
0 x
dx
1 48
(a) 51 (b)
5 5
7
(c) 48 (d) 55
15
194. The mean of numbers 1, 7, 5, 3, 4, 4 is m. The numbers 3, 2, 4, 2, 3, 3, P have mean m-1. Then
mean of P and 1 is equal to _______
(a) 4.0 (b) 2.5
(c) 4.5 (d) 3.5
195. For a 10 year deposit, what interest rate payable annually is equivalent to 5% interest payable
quarterly ?
(a) 5.1% (b) 4.9%
(c) 6.0% (d) None of these
196. The sum of first m terms of an A.P. is same as the sum of first n terms. Find the sum of first
(m+n) terms:
(a) 100 (b) m+n
(c) 0 (d) m–n
197. The distance from the origin to the point of intersection of two straight lines having equation
3x – 2y = 6 and 3x+2y = 18 is
(a) 3 units (b) 5 units
(c) 4 units (d) 2 units.
198. The relation “is father of” Over the set of family members is the relation
(a) Reflexive (b) Symmetric
(c) Transitive (d) None of these
199. If P= {1, 2, 3, 4} and Q= {2, 4, 6} then P  Q
(a) {1,2,3,4,6} (b) {1,4,6}

(c) {1,2,3,6} (d) None of these
200. There are four hotels in a certain city. If 3 men check into hotels in a day, what is the
probability that they each are into a different hotels.
(a) 0.050 (b) 0.375
(c) 0.675 (d) 0.525


BOARD OF STUDIES
1. Loss leads to reduction in:

(a) Liability (b) Capital
(c) Income (d) None of the three
2. Financial position of the business is ascertained on the basis of :
(a) Profit and Loss account
(b) Trial balance
(c) Balance Sheet
3. The determination of expenses for an accounting period is based on the principle of:
(a) Objectivity (b) Materiality
(c) Matching (d) Periodicity
4. Rent payable to the landlord Rs. 5,000.00 is credited to
(a) Cash account (b) Landlord account
(c) Outstanding rent account (d) None of the above
5. Bad debts entry is passed in
(a) Sales book (b) Cash book
(c) Journal book (d) None of the these
6. Goods were sold on credit basis to XY Bros. for Rs. 1,000. This will be recorded in
(a) Cash book (b) Journal proper
(c) Bills receivable book (d) Sales book

7. Compensation paid to retrenched employee is:

(c) Deferred revenue expenditure (d) Capital loss
8. Petty expenses paid in cash are recorded in:
(a) Purchase book (b) Sales book
(c) Petty cash book (d) Purchase return book
9. On April 1, 2010, a bill was drawn for two months. The maturity date of payment will fall on:
(a) June 1, 2010 (b) June 4, 2010
(c) June 5, 2010 (d) None of the above
10. Current assets does not include:
(a) Cash (b) Inventory
(c) Trade receivables (d) Furniture & Fittings
11. Rs. 5,000.00 spent on maintenance of plant and machinery is:
(a) Revenue expenditure (b) Capital expenditure
(c) Deferred capital expenditure (d) None of the three above
12. Mr. X has a Trade receivables of Rs. 1,00,000. Creating a provision for discount @ 2%
on Trade receivables is in accordance with-
(a) Conservatism Principle (b) Materiality Principle
(c) Cost Principle (d) Consistency Principle
13. Interest on capital will be paid to partners if provided for in the agreement but only from
(a) Current profit (b) Reserves
(c) Accumulated profit (d) Goodwill
14. At the time of death of a partner, firm gets _______ from the insurance company against
the joint life policy taken jointly for all the partners
(a) Policy amount
(b) Surrender value
(c) Policy amount or surrender value whichever is higher
(d) Policy amount or surrender value whichever is lower
15. Revaluation account is prepared at the time of _________
(a) Admission of a partner (b) Retirement of a partner
(c) Both (a) and (b) (d) None of the three
16. While preparing a Bank Reconciliation Statement, if you start with overdraft as per Cash
Book, then interest debited in pass book but not yet in cash book with in the period is
(a) Added (b) Deducted
(c) Not required to be adjusted (d) None of the above

17. Inventory is ______
(a) Fixed assets
(b) Current assets
(c) Investments
(d) Intangible fixed assets
18. As per Section 37 of the Indian Partnership Act, 1932 the executors would be entitled at
their choice to the interest calculated from date of death till the date of payment on the final
amount due to the dead partner at _______ percent per annum.
(a) 7 (b) 4
(c) 6 (d) 12
19. Fluctuating capital account is credited with
(a) Interest on capital
(b) Profit of the year
(c) Remuneration to the partners
20. If the incoming partner brings any additional amount in cash other than his capital
contribution then it is termed as ________
(a) Capital (b) Reserves
(c) Profit (d) Premium for goodwill
21. A businessman purchased goods Rs. 25,00,000 and sold 70% of such goods during the
accounting year ended 31st March, 2010 the market value of the remaining goods was
Rs. 5,00,000 He valued the closing inventory at Rs. 5,00,000 and not Rs. 7,50,000 due
to
(a) Money measurement (b) Cost
(c) Conservatism (d) Periodicity
22. A machine was purchased for Rs. 1,00,000 on 01.01.2009 and on 31.12.2009 its net
realizable value was Rs. 1,50,000.00. Do you prefer to count this profit? If you count
which of the following concepts will be violated?
(a) Realisation (b) Conservatism
(c) Accrual (d) Matching
23. The plant and machinery account of a firm had a debit balance of Rs. 1,45,800 on January
1, 2010. It was purchased on January 1, 2007. Firm has been following the practice of
charging full years depreciation every year @ 10% on diminishing balance. The cost of
machinery in 2007 will be:
(a) Rs. 2,00,000.00 (b) Rs. 2,25,000.00
(c) Rs. 1,90,000.00 (d) Rs. 2,50,000.00

24. Rs. Rs.

Opening inventory 80,000.00 Purchase returns 6,000.00
Cash purchases 1,00,000.00 Sales returns 10,000.00
Credit purchases 2,00,000.00 Carriage inwards 12,000.00
Cash sales 1,60,000.00 Wages 12,000.00
Credit sales 2,50,000.00 Closing inventory 60,000.00
Gross profit of the firm will be
(a) Rs. 62,000.00 (b) Rs. 75,000.00

(c) Rs. 80,000.00 (d) Rs. 60,000.00
25. Mohan started business with Rs. 10,000.00 cash and Rs. 2,000.00 furniture. Sales amounted
to Rs. 50,000.00 including Rs. 5,000.00 cash sales. Rs. 10,000.00 sales were outstanding at
the end of the year. Purchase amounted to Rs. 30,000.00 including Rs. 10,000.00 cash
purchases. Rs. 15,000.00 has been paid to suppliers. Expenses paid during the year
19,300. Trial Balance total will be -
(a) Rs. 67,000.00 (b) Rs. 70,000.00
(c) Rs. 75,000.00 (d) Rs. 80,000.00
26. A new machine was purchased for Rs. 1,00,000 but the amount was wrongly posted to
furniture account as Rs. 10,000 and cash received from customers Rs. 11,200 was omitted
to be posted in the ledger. The difference in trial balance due to such errors will be
(a) Rs. 90,000 (b) Rs. 78,800
(d) Rs. 1,01,200 (d) Rs. 1,11,200
27. A purchased a computer costing Rs. 10,000.00. Repairing expenses Rs. 1,000.00 and
miscellaneous expenses Rs. 500.00 were incurred for the Computer. He sold the computer
at 20% margin on selling price. The sale value will be:
(a) Rs. 12,500.00 (b) Rs. 11,000.00
(c) Rs. 15,000.00 (d) Rs. 14,375.00
28. According to Table F of the Companies Act, Interest on calls in arrears is charged at the
rate of
(a) 4% (b) 10%
(c) 12% (d) None of these
29. A company can issue redeemable preference shares
(a) At par (b) At premium
(c) At discount (d) None of the three

30. A second hand car is purchased for Rs. 10,000.00 the amount of Rs. 1,000.00 is spent on its
repairs, Rs. 500.00 is incurred to get the car registered in owner’s name and Rs. 1200.00 is
paid as dealer’s commission. The amount debited to car amount will be:
(a) Rs. 10,000.00 (b) Rs. 10,500.00
(c) Rs. 11,500.00 (d) Rs. 12,700.00
31. Mr. Ram is a partner in a firm. He made drawings as follows:
July 1 200.00
August 1 200.00
September 300.00
November 1 50.00
February 1 100.00
If the rate of interest on drawings is 6% and accounts are closed on March, 31, the interest on
drawings is:
(a) Rs. 29.75 (b) Rs. 35.00

(c) Rs. 30.00 (d) Rs. 40.00
32. A started business on Jan 1 with a capital of Rs. 40,000. On 31st Dec, his position was
Trade payables Rs. 4,700, machinery Rs. 40,000, furniture Rs. 2,000, Trade receivables
Rs. 1,300, Cash Rs. 15,000.
He made drawings @ Rs. 200 per month and Rs. 1,000 which he brought on 1st Oct. in the
business as further capital. Business profit will be
(a) Rs. 15,000 (b) Rs. 16,000

(c) Rs. 14,000 (d) Rs. 17,000
33. In a joint venture between A and B, A spent Rs. 3,000 on freight and also raised a loan from
Bank of Rs. 50,000 at 18% p.a. repayable after one month B spent Rs. 5,000 as selling expenses
and he also raised a loan from Bank of Rs. 1,50,000 at 18% repayable after two months. The
total expenses of Joint Venture will be:
(a) Rs. 8,000 (b) Rs. 8,500
(c) Rs. 9,500 (d) Rs. 13,250
34. A boiler was purchased from abroad for Rs. 10,000. Shipping and forwarding charges
amounted to Rs. 2,000. Import duty paid Rs. 7,000 and expenses of installation amounted to
Rs. 1,000. Amount debited to boiler A/c will be
(a) Rs. 10,000 (b) Rs. 12,000
(c) Rs. 19,000 (d) Rs. 20,000

35. A of Kanpur consigned 300 calculators costing Rs. 250 each to B of Faridabad. He paid
carriage and freight Rs. 1,500 and transit insurance Rs. 900.00
B incurred following expenses:
Unloading charges Rs. 400
Octroi Rs. 600
Carriage Rs. 800
Godown rent Rs. 500
Selling expenses Rs. 320
200 calculators were sold @ Rs. 420 each. Value of closing inventory will be -
(a) Rs. 26,400 (b) Rs. 26,000

(c) Rs. 25,000 (d) Rs. 27,000
36. The original cost of furniture amounted to Rs. 80,000. It is decided to write off 10% on the
diminishing balance of the asset each year. Balance of furniture account at the end of the
fourth year will be:
(a) Rs. 52,488 (b) Rs. 52,000
(c) Rs. 50,000 (d) Rs. 55,000
37. Mohan consigned 50 cases at Rs. 350 each to B of Varanasi to sell it on consignment basis.
Consignor paid Rs. 1,800 for freight and insurance. All the cases were sold for Rs. 28,000.
Selling expenses paid by agent Rs. 900 and their commission to Rs. 1,000. Consignment
profit will be
(a) Rs. 7,000 (b) Rs. 6,800
38. In the bank reconciliation statement when balance as per cash book is taken as the starting
point then Bank charges debited by Bank Rs. 10, cheques paid in but dishonoured
Rs. 200 and cheques paid in but not credited by bank Rs. 950 will be –
(a) Added (b) Substracted
(c) Ignored (d) None of the three
39. Goods costing Rs. 7,500 were sold at 25% profit on selling price. The amount of sales will be
(a) Rs. 8,000 (b) Rs. 10,000
(c) Rs. 9,000 (d) Rs. 11,000
40. A bill is drawn on 28 March, 2010 for one month after sight. Date of acceptance is 2nd April,
2010. The maturity date of the bill will be
(a) 1st March 2010 (b) 28th April 2010
(c) 5th May 2010 (d) 2nd May 2010

41. Which of the following is false?
(a) Equity is owner’s stake and the debenture is a debt.
(b) Rate of interest on debentures is fixed.
(c) Debenture holders get preferential treatment over the equity holders at the time of
liquidation.
(d) Interest on debentures is an appropriation of profits.
42. A and B are partners sharing profits in the ratio of 3:2. C is admitted as a new partner the
new profit sharing ratio among A, B, and C is 5:3:2. Sacrificing ratio will be
(a) 1:1 (b) 2:1
(c) 1:3 (d) None of the three
43. A, B and C were in partnership sharing profits in the ratio of 4:2:1 respectively. A guaranteed
that in no case C’s share in profit should be less than Rs. 7,500. Profits for the year 2009
amounted to Rs. 31,500. A will get
(a) Rs. 15,000 (b) Rs. 18,000
44. A and B are partners sharing in the ratio of 3:2. C is admitted for 1/5 th share and brings
Rs. 15,000 as capital and necessary amount for his share of goodwill. The goodwill of
the entire firm is valued at Rs. 60,000. Goodwill brought by C will be
(a) Rs. 12,000 (b) Rs. 10,000
45. The firm earns a profit of Rs. 20,000 and has invested capital amounting to Rs. 1,50,000. In
the same class of business normal rate of earning is 10%. Goodwill according to capitalization
method will be
(a) Rs. 40,000 (b) Rs. 50,000
46. Credit purchase of stationery worth Rs. 10,000 by a stationery dealer will be recorded in
(a) Purchases book (b) Sales book
(c) Cash book (d) None of the three
47. Debentures issued as collateral security is
(a) Added in the total of liabilities
(b) Added in the total of assets
(c) Both (a) and (b)
48. Premium on issue of debentures is recorded on the liability side under the heading.
(a) Secured loan (b) Unsecured loan
(c) Current liabilities and provisions (d) None of the three

49. A company issues 100 debentures of Rs. 1,000 each at 97 per cent. These are repayable
out of profits by equal annual drawings over 5 years. Discount on issue of debentures will
be written off in the ratio
(a) 5:4:3:2:1 (b) 4:3:2:1:1
(c) 3:3:4:2:1:1 (d) None of the three
50. Returns of cash sales is recorded in
(a) Sales return book (b) Cash book
(c) Journal proper (d) None of the three
51. Securities premium is recorded in
(a) Profit & Loss Account (b) Profit & Loss Appropriation Account
(c) Balance Sheet (d) None of the above
52. V.K. Ltd. forfeited 20 shares of Rs. 100 each (Rs. 60 called up) issued at par to Mohan on
which he had paid Rs. 20 per share. Out of these 15 shares were reissued to Sohan as Rs. 60
paid up for Rs. 45 per share. Amount transferred to capital reserve will be
(a) Rs. 100 (b) Rs. 75
(c) Rs. 200 (d) Rs. 80
53. Z Ltd. purchased plant and machinery for Rs. 2,00,000 payable as to Rs. 65,000.00 in
cash and the balance by an issue of 6% debentures of Rs. 1,000 each at a discount of
10%. Discount amount will be
(a) Rs. 10,000 (b) Rs. 15,000
54. A company issued Rs. 1,00,000 15%, debentures at a discount of 5%, redeemable after 10
years at a premium of 10%. Loss on issue of debentures will be
(a) 10,000 (b) 15,000
(c) 12,000 (d) None of the three
55. Rs.
Opening Debtors 20,000
Total sales 90,000
Cash sales 20,000
Cash received from Debtors 20,000
Bad debts 3,000
Return inward 1,000
Bills received from Debtors 10,000
Debtors at end will be
(a) Rs. 56,000 (b) Rs. 70,000

(c) Rs. 60,000 (d) Rs. 65,000

56. Goods costing Rs. 10,00,000 sent out to consignee at cost + 25%. Invoice value of goods will
be
(a) Rs. 10,00,000 (b) Rs. 12,50,000
(c) Rs. 12,00,000 (d) Rs. 12,25,000
57. 2,000 shares of Rs. 100 each were issued to promoters of the company for their legal services,
rendered in the formation of the company. For this, company credited share capital A/c and
debited.
(a) Goodwill A/c by Rs. 2,00,000
(b) Legal Services A/c by Rs. 2,00,000
(c) Formation expenses A/c Rs. 2,00,000
(d) Promoters expenses A/c Rs. 2,00,000
58. X Y Z and Company employs a team of ten workers who were paid Rs. 1,000 each in the
year ending Dec. 31, 2009. At the start of the year 2010 company raised salaries by 20%. The
amount of salaries for the year ended 31st Dec. 2010, will be
(a) Rs. 11,000 (b) Rs. 10,000
(c) Rs. 12,000 (d) Rs. 13,000
59. Machinery costing Rs. 10,00,000 was purchased on 01.04.2009. The installation charges
amounting Rs. 100,000 were incurred. The depreciation at 20% p.a. on straight line method
for the year ended 31st March 2010 will be
(a) Rs. 2,20,000 (b) Rs. 2,00,000
(c) Rs. 2,10,000 (d) None of the above
60. Original cost Rs. 1,26,000, Salvage value – nil, Useful life - 6 years.
Depreciation for the fourth year under sum of digits method will be
(a) Rs. 18,000 (b) Rs. 6,000

(c) Rs. 12,000 (d) Nil
61. The Indian Contract Act came into force on

(a) 1st Sept., 1872 (b) 23rd Nov., 1872
(c) 26th Sept., 1872 (d) 3rd Nov., 1872
62. The contract is defined in -
(a) The Sale of Goods Act, 1930 (b) The Indian Contract Act, 1872
(c) The Partnership Act, 1932 (d) None of the above
63. An agreement enforceable by law is a
(a) Contract (b) Obligation
(c) Offer (d) Promise

64. Proposal when accepted becomes -

(a) Acceptance (b) Agreement
(c) Promise (d) Lawful Promise
65. Agreement is a -
(a) Set of reciprocal promises (b) Acceptance of a proposal
(c) Contract (d) Promise
66. Which of the following is true
(a) All agreements are contract (b) All contracts are agreement
(c) All promises are agreement (d) Set of promises are contracts
67. Existing goods are such goods as are in existence -
(a) At the time of contract of sale (b) Before the time of contract of sale
(c) After the time of contract of sale (d) All of these
68. Future goods means goods to be manufactured or acquired by the seller
(a) Before making the contract of sale (b) At the time of contract of sale
(c) After making the contract of sale (d) All of these
69. Which of the following is true, delivery means -
(a) Compulsory transfer of possession by one person to another person
(b) Voluntary transfer of possession by one person to another
(c) Mere person to of possession by one person to another person
(d) All of these
70. Which one is the example of document of title to goods -
(a) Bill of lading (b) Dock-warrant
(c) Railway – Receipt (d) All of these
71. The merchantile agents include
(a) Auctioneers (b) Factors
(c) Brokers (d) All of these
72. Insolvent means
(a) A person when he ceases to pay his debts in ordinary ease of business
(b) A person when he accepts to pay his debts before due date
(c) A person when he accepts to pay his debts as they become due
(d) All of these
73. Partnership is the relation
(a) Between persons (b) Between firms
(c) Between companies (d) Among numberless persons

74. The term business includes -
(a) Every trade (b) Every occupation
(c) Every profession (d) All of these
75. Which is true statement regarding the including of the minor in partnership firm?
(a) A minor may be admitted to the benefits of partnership with the consent of all other partners
(b) A minor may be admitted to the benefits of partnership with no consent of other partners
(c) A minor may be admitted to the benefits of the consent of his partners
(d) A minor may be admitted to the benefits of partnership with the guarantee of his parents
76. Which is correct ?
(a) All the essential elements of a valid contract must be present in partnership agreement
(b) No need of essential elements of a valid contract in a partnership contract
(c) Only consideration should be present in partnership agreement
(d) All of these
77. Which is odd in case of who may be partners?
(a) Married woman (b) A competent person
(c) An old man of 60 years (d) A registered company
78. Who can enter into a contract of partnership ?
(a) Alien enemy (b) Person of unsound mind
(c) A business firm (d) A member of registered company
79. A Joint Hindu Family arises
(a) From status decided by court (b) As a result of an agreement
(c) By operation of law (d) All of these
80. A voidable agreement is -
(a) Valid but not enforceable
(b) enforceable at the option of one party
(c) Enforceable at the option of both the parties
(d) Not enforceable in court
81. A void agreement is -
(a) Illegal contract
(b) Not enforceable by law
(c) Enforceable at the option by both the parties
(d) Enforceable at the option of one party
82. An offer to be valid must
(a) Be communicated to the person to whom it is made
(b) Be communicated to the third party

(c) Be communicated to the promisor

(d) Be communicated to the promisee
83. A valid offer must be _________
(a) Capable of creating legal relation
(b) Capable of creating social relation
(c) Capable of creating business relation
(d) Capable of creating social and business relation
84. An acceptance must be __________
(a) Absolute and unqualified (b) Conditional
(c) Unconditional (d) Liable to be accepted by law
85. An offer may lapse by ___________.
(a) Counter offer (b) Revocation
(c) Rejection of offer by offeree (d) All of these
86. An agreement entered into by a minor’s ________
(a) Altogether void (b) Voidable
87. Consequences of coercion, fraud, misrepresentation makes the contract
88. The term consideration is defined in -
(a) The Transfer of Property Act, 1882 (b) The Indian Partnership Act, 1932
(c) The Sales of Goods Act, 1930 (d) The Indian Contract Act, 1872
89. Caveat Emptor means ______
(a) Let the buyer beware (b) Let the seller beware
(c) Let the buyer and seller both beware (d) None of these
90. Express contract means ________
(a) Which is made by words either spoken or written
(b) Which is made by deeds
(c) Which is made by both words and deeds
(d) Which is made by promises
91. A valid offer must be _________
(a) Capable by creating legal relation
(b) Capable of creating social relation
(c) Capable of creating business relation
(d) Capable of creating social and business relation

92. Consideration must move at the desire of ________
(a) promisor (b) promisee
(c) any other person (d) any of these
93. Quantum meriut literally means
(a) As much as is earned
(b) According to the value of work done
(c) As much as no work done
(d) None of these
94. Existing goods are such goods as are in existence ______
(a) At the time of contract of sale
(b) Before the time of contract of sale
(c) After the time of contract of sale
(d) All of these
95. Contract for the sale of “future goods” is
(a) Sale (b) Agreement to sale
(c) Void (d) Auction sale
96. The property in goods means
(a) Passing of goods (b) Custody of goods
(c) Ownership of goods (d) Both (a) and (b)
97. The right of stoppage can be exercised by unpaid seller if _____
(a) The buyer has became insolvent (b) The goods are in transit
(c) The seller must be unpaid (d) All of these
98. A partner may be expelled from partnership subject to ______
(a) The power of expulsion of a partner should be conferred by the contract between two
partners
(b) The power should be exercised by majority of partners
(c) The power should be exercised in good faith
(d) All of these
99. A agrees to pay a sum of money to B if a certain ship does not return. The ship is sunk.
A refuses to pay, what will be the advice to B.
(a) B cannot enforce the contract
(b) B can enforce the contract when the ship sinks
(c) B can sue for damage
(d) B can sue for not fulfilling the promise

100. A, B, and C enter into a partnership agreement under which ‘C’ is not liable for the
losses. D filed a suit against A, B, and C. Examine the position of C
(a) C is liable to D only
(b) C is liable to D jointly with A and B also
(c) C is not liable to D
(d) C is not liable to D jointly with A and B
101. Which one of the following is not a function of commercial banks?

(a) Advancing loans (b) Accepting deposits
(c) Issuing notes (d) Discounting bills of exchange
102. The initial membership of IMF was:
(a) 184 (b) 160
(c) 10 (d) 31
103. Population explosion occurs in ________ stage of the theory of demographic transition.
(a) first (b) second
(c) third (d) fourth
104. GRT stands for
(a) Great Route Tarry (b) Green Revaolution Technology
(c) Gross Registered Tonnage (d) None of the above
105. The government aimed to reduce Infant Mortality Rate per 1000 to ______ by 2012.
(a) 45 (b) 28
(c) 58 (d) 50
106. Population growth rate in India was negative in
(a) 1901-11 (b) 1911-21
(c) 1921-31 (d) 1931-41
107. Which one of the following resources is the most crucial input in India’s new agricultural
technology, responsible for the Green Revolution?
(a) Fertilizers (b) HYV seeds
(c) Agricultural Machinery (d) Irrigation
108. Which of the following states has the lowest literacy rate?
(a) Bihar (b) Uttar Pradesh
(c) West Bengal (d) Orissa

109. Location of sugar industry in India is influenced by :
(a) the market (b) raw material
(c) labour and entrepreneurial factors (d) none of the above
110. The MSME sector employed nearly ________ in 2011-12.
(a) 100 million (b) 40 million
(c) 10 million (d) 25 million
111. In July 1991, India devalued the rupee by about
(a) 10-12% (b) 15-16%
(c) 18-20% (d) 30-35%
112. The Foreign Trade Policy 2004-09 has :
(a) identified certain thrust areas for growth
(b) started “served from India” brand
(c) revamped Duty Free Export-Credit
113. Which one of the following offers the least liquidity?
(a) Treasury Bills (b) Immovable property
(c) Bill of exchange (d) Bearer cheques
114. India ranks ______ in the world in terms of postal network.
(a) last (b) 1st
(c) 27th (d) 10th
115. Net National Income at market prices is equal to
(a) Gross National Income at market prices minus depreciation
(b) Net Domestic Product at factor price plus or minus earnings from abroad
(c) Gross Domestic Product minus indirect taxes and subsidies
(d) Gross National Product at factor price plus or minus depreciation
116. Which one of the following assumptions is not necessary for the cardinal utility theory ?
(a) Rationality of the consumer (b) Constant marginal utility of money
(c) Perfectly competitive market (d) Additivity of utility
117. Dumping involves
(a) selling at a price in another market which is lower than the price or cost in your home
market
(b) price discrimination between the two markets
(c) surplus production at lower cost

118. The IC curve approach assumes :

(a) rationality (b) consistency
(c) transitivity (d) all of the above
119. A higher indifference curve shows :
(a) a higher level of satisfaction (b) a higher level of production
(c) a higher level of income (d) none of the above
120. Demand deposits with banks are considered as money because they are:
(a) generally acceptable as a means of payment
(b) more liquid than cash
(c) held by the government
(d) managed efficiently by bank managers
121. Which one of the following measures has been accorded the highest priority by the
government for checking the inflationary pressure on the economy since 1990?
(a) Revamping the public distribution system.
(b) Correcting the fiscal imbalance by reducing the fiscal deficit as a percentage of GDP
(c) Increasing imports
(d) Devaluation of the rupee
122. The basic aim of the lead bank scheme is that -
(a) big banks should try to open offices in each district
(b) there should be stiff competition among the various nationalized banks
(c) individual bank should adopt particular districts for intensive development
(d) all the banks should make intensive efforts to mobilize deposits
123. Which one of the following taxes belongs exclusive to the state government of India?
(a) Income tax (b) Agricultural tax
(c) Excise tax (d) Wealth tax
124. Which one of the following sources of Central revenue belongs to the category of indirect
taxes?
(a) Corporation tax (b) Customs
(c) Wealth tax (d) Interest Receipts
125. The rapid increase of public debt of the Central Government since 1950-51 has been due to
(a) uncontrolled inflation
(b) mounting shares of state government from revenues raised by the central government
(c) mounting costs of financing public expenditure
(d) rising population

126. In the case of two perfect substitutes, the indifference curve will be :
(a) straight line (b) L-shaped
(c) U-shaped (d) C-shaped
127. Which one of the following is the major characteristic of foreign direct investment (FDI)?
(a) It is non-debt creating capital flow
(b) It is portfolio investment in stock market
(c) It is that investment which involves debt servicing
(d) It is the investment made by foreign institutional investors in government securities
128. The objective of selective credit controls is mainly to :
(a) selectively allocate credit to commercial banks
(b) selectively allocate credit among borrowers
(c) regulate the quantity of demand deposits created by commercial banks
(d) regulate the quantity of credit created by commercial banks
129. A consumer is at equilibrium when :
(a) slope of the price line is equal to indifference curve
(b) he saves 10% of his income
(c) borrows an amount equal to his income from the bank
130. Since 1990, savings of the household sector in India have been
(a) greater than the savings of the private corporate sector but less than the savings of the
public sector
(b) less than the savings of the private corporate sector but more than savings of the public
sector
(c) greater than the savings of the private corporate sector as well as the savings of the public
sector
(d) less than the savings of the private corporate sector as well as the savings of the public
sector
131. Which is the Central Bank of India?
(a) SBI (b) BOI
(c) RBI (d) UTI
132. Disguised unemployment in India is maximum in :
(a) agricultural sector (b) secondary sector
(c) tertiary sector (d) none of the above

133. Unemployment rate in India is defined as the ratio of number of persons unemployed to
total
(a) Population (b) Population excluding children
(c) Labour force (d) Population excluding the aged
134. The population of India living below the poverty line
(a) is rising in relative and absolute terms
(b) is falling in relative terms but rising in absolute terms
(c) is falling in both relative and absolute terms
(d) has not changed at all over the years
135. If the Indian economy aimed at an annual growth rate of 8 per cent in national income,
assuming as incremental capital – output ratio of 3.5:1 what would be the required rate of
investment as percent of national income?
(a) 28.0 (b) 24.5
(c) 10.5 (d) 3.5
136. In order to provide acess to electricity to all areas including villages and hamlets _________
programmed was started.
(a) Rajiv Gandhi Grameen Vidhutikaran
(b) Indira Gandhi Grameen Vidhutikaran
(c) Sonia Gandhi Grameen Vidhutikaran
(d) Mahatma Gandhi Grameen Vidhutikaran
137. Which one of the following has NOT been a part of the land reforms programme in India?
(a) Ceiling on holding (b) Consolidation of holdings
(c) Agricultural holding tax (d) Zamindari abolition
138. In India, which one of the following is NOT a cooperative organization?
(a) Primary land development banks (b) Central land development banks
(c) Regional rural banks (d) State cooperative banks
139. FDI is allowed in all of the following, except
(a) Banking (b) Lottery
(c) Insurance (d) Air transport
140. Which among the following is NOT a cause of sickness of industrial units in India?
(a) Obsolescent technology (b) Labour problems
(c) Faulty location (d) Lack of capital account convertibility

141. M3 is equal to :
(a) Currency with public (b) M1 + Time deposits of the public with banks
(c) M1 + Post office savings (d) M1 + National saving certificates
142. The majority of Central Government enterprises belongs to the :
(a) Public corporations (b) Public limited companies
(c) Private Limited companies (d) Departmental organizations
143. In 1991, foreign exchange reserves were sufficient to finance imports of ___ weeks.
(a) 36 (b) 16
(c) 24 (d) 3
144. Which one of the following agencies in India is responsible for computation of national
income?
(a) NCAER (b) CSO
(c) NSS (d) RBI
145. What is the approximate share of the agricultural sector in the total employment in India?
(2013-14)
146. According to the Human Development Report-2013, the GINI index for India in 2011-12 was :
(a) 0.334 (b) 0.29
(c) 0.53 (d) 0.18
147. Over the plan era, the relative share of areas under food grains in gross cropped area in
India has:
(a) decreased (b) increased
(c) remained the same (d) decreased initially and then increased
148. Which one of the following is NOT an important import item of India at present?
(a) Petroleum oil (b) Edible oil
(c) Fertilizers (d) News print
149. The total area under the demand curve of a good measures:
(a) marginal utility (b) total utility
(c) consumers surplus (d) producers’ surplus
150. The incremental capital output ratio (ICOR) during the XI plan of India was
(a) 5.02 (b) 3.04
(c) 4.0 (d) 6.37

151. The inverse ratio of 13:17 is
(a) 17:13 (b) 13 : 17

2
(c) 169:17 (d) None of these
152. The duplicate ratio of 5:7 is
(a) 7:5 (b) 15:21
(c) 52 :7 2 (d) None of these
153. The value of 3 × (32)1/5 is

(a) 3 (b) 15
154. The value of 2 × (128)–1/7 is
(a) 1 (b) 2
155. log (3 × 5 × 7) is equal to
(a) log 3 × log 5 × log 7 (b) log 3 + log 5 + log 7
(c) log 3 – log 5 – log 7 (d) 0
156. log (5/7) is equal to
log 5
(a) (b) log 5 + log 7
log 7
(c) log 5 – log 7 (d) None of these
157. The equation of the line passing through (5, 0) and (0, 5) is
(a) x–y=5 (b) x+y=5
(c) 5x + 5y = 1 (d) None of these
158. The equation of the line parallel to the line joining (7,5) and (2,9) and passing through the
point (3, –4) is
(a) 4x + 5y + 8 = 0 (b) 4x – 5y + 8 = 0
(c) 4x – 5y – 8 = 0 (d) None of these

159. The equation 5x + 7(x – 3) – 4(x + 10) = 0 is
(a) Quadratic equation (b) Linear equation
(c) Cubic equation (d) None of these
160. The equation (x – a) (x – b) = 0 is satisfied by

(a) x=0 (b) x = a, b
(d) x = –a, –b (d) None of these
161. The inequalities x  0, y  0 indicates

(a) First quadrant (b) Second quadrant
(c) Third quadrant (d) Fourth quadrant
162. Rs. 10,000 is invested at annual rate of interest of 10% p.a. The amount after two years at
annual compounding is
(a) Rs. 21,100 (b) Rs. 12,100
(c) Rs. 12,110 (d) None of these
163. P(n,r) is equal to
n n  r
(a) r nr (b)
r
n
(c) nr (d) None of these
164. 0! × 6! is equal to
(a) 720 (b) 0
(c) 6 (d) –120
165. In how many ways can 8 persons sit at a round table for a meeting?
(a) 40320 (b) 64
(c) 5040 (d) 720
166. There are 7 routes from station X to station Y. In how many ways one may go from X to Y
and return, if for returning one can make a choice of any of the routes?
(a) 49 (b) 17
(c) 42 (d) 35

1 1 1
167. The sum of the series 1, , , to  is
3 32 33
4 3
(a) (b)
3 2
1
(c) (d) None of these
3
168. The number of subsets of the set {2, 4, 6, 8} is
(a) 8 (b) 15
(c) 16 (d) 4
169. If A = {1, 3, 5, 7, 9}, B = {2, 4, 6, 8, 10} then A  B is
(a) {0} (b) 

(c) {1, 2, 3, 4, 5, 6, 7, 8, 9, 10} (d) None of these
170. If A = {3, 5, 7} and B = {0, 2, 4, 6}, then A  B is
(a)  (b) {0, 2, 3, 4, 5, 6, 7}

(c) {0} (d) None of these
171. The series 1 + 2 + 3 + 4 + ….. + 100 is
2
100( 101 )  100( 101 ) 
(a) (b)  
2  2 
(c) 100 × 101 (d) None of these
172. If A = {1, 2, 3, 4} and B = {5, 6, 7}, then cardinal number of A X B is
(a) 4 (b) 7
1
173. lim
x 0 x
(a) does not exist (b) +
(c) – (d) None of these
x2 - 9
174. lim
x3 x-3
(a) Does not exist (b) 6


x 2 - 25
175. If f(x) = , then the value of f(x) at x = 5, i.e. f(5) is equal to
x -5
(a) 10 (b) Undefined
dy
176. If y = ax3 + bx2 + cx + d, then is equal to
dx
ax4 bx3 cx4

(a) 3ax 2 + 2bx + c (b)    dx
4 3 2
dy
177. If f(x) = 5xa+10ax, then is equal to
dx
(a) 3ax a-1 + 10xax-1 + 3a.aa-1 (b) 5ax a-1 + 10ax loga
(c) 5x a + logx + 10xax-1 (d) None of these
1
5
178.  10x dx is equal to
0
5 6 3
(a) x (b)
3 5
5
3
logx
179.  x
dx is equal to
1 1
(a) log x  k (b) (log x )2  k
2 2
1 2
(c) x k (d) None of these
2
 e x + e-x 
180. is equal to   x -x  dx
10
 e -e 
(a) 10 log | ex - e-x | + k (b) 10 log | ex + e-x + k |

(c) log (ex - e-x) (d) None of these

216 × 310 × 54
181. The value of 12 6 is equal to
2 × 3 × 53
(a) 2160 (b) 6480

(c) 648 (d) 3240
182. The value of ya - m  ym - n  yn - a is equal to
(a) 1 (b) 0
(c) –1 (d) y
183. The value of log (1 + 2 + 3 + ............. +n) is equal to
(a) log 1+ log 2 + …. + log n (b) log n + log (n+1) – log 2
(c) 0 (d) 1
184. The roots of the equation x2 - 3x + 2 = 0 are
(a) 1, 2 (b) 0, 1
(c) 0, 1, 2 (d) 1, 2, 3
185. The roots of the equation x2 - x + 1 = 0 are
(a) Imaginary and unequal (b) Real and unequal
(c) Real and equal (d) Imaginary and equal
186. Interest earned on Rs. 3,000 at 5% p.a. simple interset for three years is ______
(a) Rs. 540 (b) Rs. 450
(c) Rs. 45 (d) Rs. 54
187. The inequalities x < 0, y > 0 indicates ______
(a) Third quadrant (b) First quadrant
(c) Second quadrant (d) Fourth quadrant
o 5
188. 2 is equal to
(a) 60 (b) 0
n
189. Cr is equal to
n n
(a) n r (b) r nr
n r n nr
(c) n r (d) r

190. The nth term of the sequence 2, 4, 6, 8 ….. is ______
(a) 2n (b) 2n–1
(c) 2n + 1 (d) n
1 1
191. The sum of the series 1, , , ........... to  is ______
10 102
9 1
(a) (b) 1
10 9
(c)  (d) None of these
192. If a, b, c are in A.P., then 2b = _____
(a) a–c (b) a+c
ac a c
(c) (d)
2 2
193. If a, b, c are in G.P., then b2 = _____

(a) ac (b) –ac
(c) a+b (d) a–c
194. If A = {1, 3, 5} , B = {0, 2}, then A  B is ______
(a) {0, 1, 2, 3, 5} (b) 

(c) {1, 3, 5, 7, 9, 13} (d) None of these
3
2
195. Evaluate the value of  (3x
0
+ 5x + 2)dx
(a) 55 (b) 55.5

(c) 57 (d) 56
196. If A = {1, 2, 3, 4} and B = {5, 6, 7}, then cardinal number of the set A×B is _____
(a) 7 (b) 1
1
197. lim
x  (x - a) 2 is equal to _______
(a) 0 (b) +
(c) – (d) 1

X 2 - 5X + 6
198. lim is equal to ________
x 3 x -3
(a) –1 (b) + 
(c) 1 (d) Does not exist
3x + 5
199. lim
x  x 3 + 2 is equal to __________
(a) 0 (b) 1
(c) –1 (d) Does not exist
200. The function f(x) is continuous at x = a if xlim

a+
f(x) = lim- f(x) = ___________
x a
(a) f(–a) (b) f(a)

(c) f(0) (d) None of these


BOARD OF STUDIES
1. Rs. 1,500 spent on repairs before using a second hand car purchased recently is a
(c) Deferred revenue expenditure (d) None of the three
2. Commission received in advance is a
(a) Personal account (b) Nominal account
(c) Real account (d) None of the three
3. All of the following have debit balance except
(a) 6% Debentures (b) Loan to contractor
(c) Interest on debentures (d) Audit Fee
4. Double column cash book records
(a) Only credit transactions
(b) All transactions
(c) Cash and bank transactions
(d) Cash purchase and credit sale transactions
5. A bill has been drawn on August 10, 2009 payable after 3 months. The maturity date of
the bill will be
(a) Nov. 13, 2009 (b) Nov. 10, 2009
(c) Oct. 31, 2009 (d) None of the above
6. Salary and wages is debited to
(a) Trading Account (b) Profit and Loss Account
(c) P/L Appropriation account (d) Balance Sheet

7. In a sole trade, income tax is recorded as

(a) Drawings (b) Liabilities
(c) Expenses (d) None of the three
8. Journal proper records
(a) Credit purchases (b) Credit sales
(c) Purchase of an asset on credit (d) Sales return
9. If the date of maturity of a bill is a unforeseen holiday, then bill will mature on
(a) Next working day (b) Preceding working day
(c) Holiday itself (d) Other agreed date
10. In case of consignment, abnormal loss is valued at
(a) Cost price (b) Invoice price
(c) Market price (d) None of the three.
11. Capital expenditures are recorded in the
(a) Profit and Loss account (b) Balance Sheet
(c) Trading account (d) Manufacturing account
12. Account payable normally has balance
(a) Debit (b) Credit
(c) Unfavourable (d) None of the three
13. Trial balance is a statement which shows the ______ or the ______ of all the accounts
(a) Debit; Debit and Total and balances (b) Opening Balances; Closing balances
(c) Posted balances; Total of balances (d) Debit balance; Credit balance
14. Prepaid salary account is
(a) Personal account (b) Real account
(c) Nominal account (d) None of the three
15. When money is withdrawn from the bank, the bank _______ the account of the customer.
(a) Credits (b) Debits
(c) Either (a) or (b) (d) None of the three
16. Abnormal loss on consignment is credited to ______
(a) Profit and Loss account (b) Consignees’ account
(c) Consignment account (d) None of the three
17. Land and building is a
(a) Current asset (b) Fixed asset
(c) Fictitious asset (d) None of the three

18. The profits of last three years are Rs. 84,000, Rs. 78,000 and Rs. 90,000. Find out the
goodwill of two years purchase.
(a) Rs. 84,000 (b) Rs. 1,68,000
(c) Rs. 2,52,000 (d) Rs. 72,000
19. Closing inventory of Rs. 19,000 in trial balance will be recorded in
(a) Trading account (b) Profit and Loss account
20. A & B are partners in a firm, sharing profits and losses in the ratio of 3:2. ‘C’ was
admitted for 1/6 share in the future profits with a capital of Rs. 25,000. The new profit
sharing ratio will be
(a) 3:2:1 (b) 1:1:1
(c) 5:3:2 (d) 5:3:1
21. When depreciation is recorded by charging to Asset Account, the asset appears-
(a) At original cost (b) At original cost less depreciation
(c) At market value (d) At realizable value
22. X Ltd. purchased equipment from Y Ltd. for Rs. 50,000 on 1st April 2009 the freight and
cartage of Rs. 2,000 is spent to bring the asset to the factory and Rs. 3,000 is incurred
on installing the equipment to make it possible for the intended use. The market price
of machinery on 1st April, 2010 is Rs. 60,000 and the accountant of the company wants
to disclose the machinery at Rs. 60,000 in financial statements. However, the auditor
emphasizes that the machinery should be valued at Rs. 55,000
(a) Money measurement principle (b) Historical cost concept
(c) Full disclosure principle (d) Revenue recognition
23. A started business with Rs. 10,000 cash. Sales amounted to Rs. 50,000 including
Rs. 5,000 cash sale. Rs. 10,000 sales were outstanding at the end of the year. Purchases
amounted to Rs. 30,000 including Rs.10,000 cash purchase Rs. 15,000 has been paid to
suppliers. Salaries paid amounted to Rs. 3,000, Rent Rs. 2,400, Stationery Rs. 900.
Drawings were 4,000. Miscellaneous expenses Rs. 1,000 and machines purchased
Rs. 8,000. Cash balance will be
(a) Rs. 15,000 (b) Rs. 15,500
24. If sales revenue is Rs. 5,00,000, cost of goods sold is Rs.3,10,000. The gross profit is
(a) Rs. 1,90,000 (b) Rs. 2,00,000

25. Received a bill from Arun Rs. 5,000 passed through bills payable book. The rectification
entry will be
Rs. Rs.
(a) B/R A/c Dr. 5000
To Arun 5000
(b) Arun Dr. 5000
To B/R A/c 5000
(c) B/R A/c Dr. 5000
B/P A/c Dr. 5000
To Arun 10000
26. A machinery of Rs. 4,000 was sold for Rs. 5,200. Depreciation provision to date was Rs. 500
and Commission paid to the selling agent was 420 and wages paid to workers for removing
the machine was Rs. 150. Profit on sale of machinery will be
(a) Rs. 1,130 (b) Rs.1,000
(c) Rs. 1,200 (d) None of the three.
27. Interest earned but not received, adjustment entry will be
(a) Accrued Interest Dr.
To Customer
(b) Accrued interest Dr.
To Interest
(c) Cash a/c Dr.
To Interest
28. Goods of Rs. 600 (sales price) sent on sale on approval basis were included in sales book. The
profit included in the sales was at 20% on cost. Closing inventory will increase by
(a) Rs.500 (b) Rs.600
(c) Rs.480 (d) None of the three
29. A manager gets 5% commission on net profit after charging such commission. Gross profit
Rs. 48,000 and expenses of indirect nature other than manager’s commission are Rs. 6,000.
Commission amount will be
(a) Rs.2,000 (b) Rs.1,800
30. What shall be the commission of the manager if the rate of commission is 5% on net
profit before charging such commission and when gross profit is Rs. 48,000 and expenses
of indirect nature other than manager’s commission is Rs. 6,000?
(a) Rs.2,100 (b) Rs.1,800

31. X sells goods at cost plus 60%. Total sales were of Rs. 16,000. Cost price of goods will be
(a) Rs.10,000 (b) Rs.9,000
32. A trader sells goods at a profit of 25% on sale. In a particular month, he sold goods costing
Rs. 34,200. Rate of profit on cost will be -
1
(a) 33 % (b) 30%
3
(c) 35% (d) None of the three
33. A manager gets 5% commission on sales. Cost price of goods sold is Rs. 40,000 which he sells
at a margin of 20% on sale. Commission will be
(a) Rs. 2,500 (b) Rs. 2,400
34. Following balances have been taken from the books of VED & Co.
Rs. Rs.
General expenses 800 Discount allowed 200
Rent paid 3,710 Opening inventory 16,500
Electric charges 190 Sales 63,500
Carriage inward 850 Purchases 46,850
Return outwards 110 Wages 2,500
Salaries 1110 Sales Return 450
Net profit of the business will be ______
(a) Rs. 8,660 (b) Rs. 8,600

(c) Rs. 8,500 (d) Rs. 9,000
35. Capital introduced in the beginning by Ram Rs. 20,000; Further capital introduced during
the year Rs. 2,000; Drawings Rs. 250 per month and closing capital is Rs. 12,750. Amount of
Profit or Loss for the year will be
(a) Loss Rs. 6,250
(b) Loss Rs. 6,000
(c) Profit Rs. 2,000
(d) Information is insufficient for any comment
36. Overdraft as per Cash Book Rs. 4,500
(1) Cheques sent for collection but not credited by Bank Rs.6,225
(2) Cheque drawn but not presented for payment Rs.10,250
Overdraft as per Pass Book will be
(a) Rs.475 (b) Rs.750

(c) Rs.500 (d) None of the three

37. G’s trial balance contains the following information –

Bad debts Rs. 4,000; Provision for doubtful debts Rs. 5,000; Trade receivables
Rs. 25,000
It is desired to create a provision for doubtful debts at 10% on Trade receivables at the
end of the year. Trade receivables will appear in the balance sheet at
(a) Rs. 21,000 (b) Rs. 22,500
38. An inexperienced book-keeper has drawn up a trial balance for the year ended 30th June, 2010.
Dr. Cr.
Rs. Rs.
Provision for Doubtful Debts 200
Bank overdraft 1,654
Capital - 4591
Trade payables - 1637
Discount received 252
Discount allowed - 733
Drawings 1,200
Office furniture 2,155
General expenses - 829
Purchases 10,923
Return inward - 330
Rent and Rates 314
Salaries 2,520
Sales - 16882
Inventory 2,418
Stationary 1,175
Provision for Depreciation on furniture 364
Total 26,158 25002
The total of corrected trial balance will be
(a) Rs.25,580 (b) Rs.25,000
39. Rs.
Balance as per adjusted cash book 274
(i) Cheques issued but not yet presented 730
(ii) Cheques deposited but not collected by bank 477
Balance as per Pass Book will be
(a) Rs. 527 (b) Rs. 525

(c) Rs. 500 (d) None of the three.

40. R owed Rs. 1,000 to S. On 1st Oct., 2004, R accepted a bill drawn by S for the amount for
3 months. Before the due date, R approached S for renewal of the bill. S agreed on the
conditions that Rs. 500 to be paid immediately together with interest on the remaining
amount at 12% p.a. for 3 months and for the balance R accepted a new bill for 3 months.
Later on, R became insolvent and 40% of the amount could be recovered from his estate.
Bad debt amount will be
(a) Rs. 400 (b) Rs. 300
41. A of Allahabad sent on consignment to B of Bareilly 1,000 transistors costing Rs. 80 each. A
paid freight amounting to Rs. 1,000 and cartage Rs. 45. B received only 900 sets as 100 sets
were destroyed in transit. B incurred an expenditure of Rs. 1,000 on account of clearing
charges and cartage. Amount of abnormal loss will be
(a) Rs. 8,104.50 (b) Rs. 8,000
42. Amit of Delhi sent 200 chairs @ Rs. 300 per chair to Sumit of Chandigarh. Amit paid freight
of Rs. 500 and Rs. 200 as insurance in transit. Sumit paid Rs. 100 as Cartage and Rs. 300 as
godown rent. At the end of the year, 150 chairs were sold. The selling price of each chair in
Chandigarh was Rs. 350. Value of inventory unsold will be
(a) Rs. 15,000 (b) Rs. 15,200
43. C of Calcutta and D of Delhi entered into a joint venture for the purpose of buying and
selling second-hand motor cars. C to make purchases and D to effect sales. A sum of Rs.
1,00,000 was sent by D to C for this joint venture. C purchases 10 cars for Rs. 80,000 and
spent Rs. 43,500 for their reconditioning and dispatched them to Delhi. His other
expenses were 2½% purchase commission and miscellaneous expenses Rs. 250. D spent
Rs. 7,500 as railway freight and Rs. 3,750 an Octroi at the time of taking delivery. He
sold all the cars for Rs. 1,88,500. His expenses were Insurance Rs. 1,500; Garage rent
Rs. 2,500; Brokerage Rs. 6,850 and other expenses Rs. 4,500. Profit on venture will be
(a) Rs. 36,150 (b) Rs. 36,000
44. A, B and C are partners sharing profits in the ratio of 5:4:1. C is given a guarantee that his
share of profit in any given year would not be less than Rs. 5,000. Deficiency, if any,
would be borne by A and B equally. The Profits for the year 2009 amounted to Rs. 40,000.
The amount of C’s deficiency to be shared by A and B will be
(a) Rs. 500 each (b) Rs. 400 each
(c) Rs. 600 each (d) None of the three.

45. Raja, Roopa and Mala sharing profits and losses equally have fixed capitals of Rs.1,20,000,
Rs.90,000 and Rs.60,000 respectively. For the year 2009, interest on capital was credited to
them @ 6% instead of 5%. Adjusting entry will be
Rs. Rs.
(a) Raja’s Current A/c Dr. 300
To Mala’s Current A/c 300
(b) Raja’s Capital A/c Dr. 300
To Mala’s Capital A/c 300
(c) Mala’s Current A/c Dr. 300
To Raja’s Current A/c 300
46. A, B and C are partners sharing profits/losses at 3:2:1. D was admitted in the firm as a new
partner with 1/6th share. New profit/loss sharing ratio will be
(a) 15:10:5:6 (b) 10:15:6:5
(c) 5:6:15:10 (d) None of the three
47. A and B are partners sharing profits in the ratio of 4:1. A surrenders ¼th part of his share
and B surrenders ½ part of his share in favour of C, a new partner. Sacrificing ratio of A
and B will be ____
(a) 2:1 (b)1:2
(c) 1:1 (d)None of the three
48. Goodwill of the firm is valued at three year’s purchase of the average profits of the last five
years. The profits are as under:
Rs.
2005 40,000 Profit
2006 20,000 Loss
2007 10,000 Profit
2008 60,000 Profit
2009 80,000 Profit
Goodwill amount will be
(a) Rs.1,02,000 (b) Rs.1,00,000

(c) Rs.1,05,000 (d) None of the three
49. (i) Actual average profit Rs. 72,000

(ii) Normal rate of return 10%
(iii) Assets Rs. 9,70,000
(iv) Current Liabilities Rs. 4,00,000
Goodwill according to capitalization method will be
(a) Rs. 1,50,000 (b) Rs. 1,40,000

50. “Bill payable discounted in cash by supplier.” This transaction will be recorded in
(a) Journal (b) Ledger
(c) Bank book (d) No entry required to be made
51. The capitals of A and B after all adjustments and revaluations are Rs. 24,000 and Rs.16,000
respectively. They admitted C as a new partner with 1/5th share in the profits. Capital to be
brought by C will be
(a) Rs.10,000 (b) Rs.15,000
52. X and Y are partners in a firm sharing profits in the ratio of 3:2 with capitals of Rs. 1,20,000
and Rs. 54,000 respectively. They admitted Z as a partner with Rs. 75,000 for 1/3rd share in
the profits of the firm. Adjust the capitals of the partners according to Z’s capital and his
share in the business. What cash will be paid off to X?
(a) Rs. 30,000 (b) Rs.25,000
53. A Ltd. forfeited 400 shares of Anil of Rs. 10 each fully called up for non payment of final call
of Rs. 2 per share and reissued to Sunil as fully paid for Rs. 10 per share. Amount transferred
to Capital Reserve will be
(a) Rs. 3,200 (b) Rs. 3,000
54. D Ltd. forfeited 800 shares of Rs. 10 each fully called up, on which the holder has paid only
application money of Rs. 3 per share. Out of these 500 shares were reissued as Rs. 11 per
share fully paid up. Capital Reserve will be credited by
(a) Rs. 1,500 (b) Rs. 1,800
55. X Ltd. purchased the business of Y Ltd. for Rs. 90,000 payable in fully paid shares of
Rs. 9 each. No. of shares given to vendors will be
(a) 9,000 shares (b) 8,000 shares
(c) 7,000 shares (d) None of the three.
56. A company purchased an established business for Rs. 4,00,000 payable Rs. 1,30,000 in cash
and the balance by 12% debentures of Rs. 100 each at discount of 10%. Discount on issue of
debentures will be
(a) Rs. 25,000 (b) Rs.30,000

57. Issued 2,000, 12% Debentures of Rs. 100 each at a discount of 2% redeemable at a
premium of 5%. Loss on issue of debentures will be
(a) Rs.14,000 (b) Rs.12,000
58. (i) 1,00,000 Equity shares of 10 each fully called up.
(ii) Calls in arrears Rs. 10,000
(iii) Calls in advance Rs. 5,000
(iv) Proposed dividend 15%
Dividend payable will be
(a) Rs.1,48,500 (b) Rs.1,50,000

(c) Rs.1,45,000 (d) None of the three
59. Which of the following is correct?
(a) Profit/Loss = Closing Capital + Additional Capital –Drawings made –Opening Capital
(b) Profit/Loss = Closing Capital –Drawings–Additional Capital -Opening Capital
(c) Profit/Loss = Closing Capital – Drawings – Additional Capital –Opening Capital
(d) Profit/Loss = Closing Capital + Drawings – Additional Capital –Opening Capital
60. On 1st January 2010, Badri of Kanpur consigned 100 cases, cost price Rs. 7,500, at a
proforma invoice price of 25% profit on sales to his agent Anil of Allahabad. Balance of
Goods sent on consignment A/c transferred to General Trading A/c will be
(a) Rs. 7,500 (b) Rs. 10,000
61. Which of example is the case of Undue influence, where one party is in a position to influence
the will of other party?
(a) Agreement between one trader with other trader
(b) Doctor and patient
(c) Employer and his employee
62. Which is the example of wagering agreement?
(a) To purchase a lottery ticket
(b) Speculative trading in stock exchange
(c) Horse – race
(d) Solving of puzzle

63. Which of the following statement is true?
(a) If there is no consideration, there is no contract
(b) Past consideration is no consideration in India
(c) Consideration must result in a benefit to both the parties
(d) Consideration must be adequate
64. Which of the following statement is false?
(a) A stranger to a contract cannot sue
(b) A verbal promise to pay a time barred debt is valid
(c) Completed gifts need no consideration
(d) No consideration is necessary to create an agency
65. An agreement is not said to be a contract when it is entered into by
(a) Minor (b) A person of unsound mind
(c) Foreign enemy (d) All of these
66. Which of the following statement is true?
(a) A threat to commit suicide does not amount to coercion
(b) Undue influence involves use of physical pressure
(c) Ignorance of law is no excuse
(d) Silence always amounts to fraud
67. Which of the example is the case of contracts need not be performed?
(a) A party substitutes a new contract for the old
(b) When the parties to a contract agree to rescind it
(c) When the parties to a contract agree to alter it.
(d) All of these
68. On the valid performance of the contractual obligation by the parties the contract is:
(a) is discharged (b) becomes void
(c) become unenforceable (d) None of these
69. Contract of sale means
(a) A contract between one person to another for exchange of property in goods
(b) A contract between buyer and seller for exchange of property in goods
(c) a contract between buyer and seller intending to exchange property in goods for a price
(d) All of these
70. Which of the following sentence is true ?
(a) There should be immediate delivery of goods
(b) There should be immediate payment of price
(c) There may be delivery of goods and payment of price on to be made at some future date.
(d) All of these

71. Where there is an agreement to sell specific goods and goods subsequently perish before
risk passes to the buyer, the agreement becomes
72. Which is not the subject matter of contract of sale ?
(a) Goods (b) Price
(c) Immovable property (d) Shares and stocks of companies
73. Where the goods are sold by sample as well as by description the implied condition is that
the bulk of the goods supplied must correspond with
(a) Sample only (b) The description only
(c) Sample and description both (d) Sample, description and fair price
74. In the case the goods correspond with the sample but do not tally with the description the
buyer has right to
(a) Repudiate the contract (b) Sue for damages caused to him
(c) Declare the contract as illegal (d) Declare the contract as void
75. A stipulation essential to the main purpose of the contract is:
(a) Conditions (b) Warranties
(c) Conditions and warranties both (d) None of these
76. A Joint Hindu Family arises
(a) From status (b) As the result of an agreement
(c) By operation of law (d) Both (a) & (c)
77. In partnership a new partner can be admitted
(a) Only with the consent of all the partners
(b) No consent of all the partners
(c) With the consent of two third majority of partners
(d) With the consent of two partners
78. Goodwill is
(a) The value of reputation which the firm establishes overtime
(b) The value of reputation which the firm earns due to integrity, efficient service to the
customers
(c) The value of reputation earned by the firm due to quality of its products, industry etc.
(d) All of these
79. Which is appropriate that partner is liable for all acts of the firm done while he is a partner -
(a) Jointly with all other partners (b) Severally
(c) Not liable (d) None of these

80. A contract dependant on the happening of future uncertain event, is a _______
(a) Uncertain contract (b) Contingent contract
(c) Void contract (d) Voidable contract
81. A contingent contract depending on the happening of future uncertain event can be enforced
when the event.
(a) Happens (b) Becomes impossible
(c) Does not happen (d) Either of these
82. For the purpose of entering into a contract, a minor is a person who has not completed the
age of _______
(a) 20 years (b) 21 years
(c) 18 years (d) 25 years
83. A contract with the minor which is beneficial for him is ________
(a) Void abinitio (b) Voidable
(c) Valid (d) Illegal
84. If a creditor does not file a suit against the buyer for recovery of the price within three years
the debt becomes ______
(a) Time-barred and hence irrecoverable
(b) Time barred but recoverable
(c) No time-barred
(d) None of these
85. Delivery means _____
(a) Compulsory transfer of possession by one person to another person
(b) Voluntary transfer of possession by one person to another
(c) Mere transfer of possession by one person to another person
(d) All of these
86. The general principle of regarding the transfer of title is that ______
(a) The seller can transfer to the buyer of goods a better title than he himself has
(b) The seller cannot transfer to the buyer of goods a better title than he himself has
(c) The seller can transfer to the buyer of goods no title than the himself has
(d) None of these
87. When the owner is estopped for the conduct from denying the sellers authority to sell,
the transferee will get _____
(a) A good title as against the true owner
(b) A better title as against the true owner
(c) No title as against the true owner
(d) None of these

88. When an unpaid seller who had exercised the right of lien resells the goods, the buyer
acquires ________
(a) A good title to the goods as against the original buyer
(b) Better title as against the true buyer
(c) No title as against the true owner
(d) None of these
89. When the time of sending the goods has not been fixed by the parties the seller must send
them within ______
(a) Reasonable time
(b) One month of the contract
(c) Two months of the contract
(d) Before making the contract
90. The expenses of putting the goods into a deliverable state must be borne by ______
(a) The buyer (b) The seller
(c) The buyer and seller both (d) The third party
91. The seller of goods is deemed to be an unpaid seller when ______
(a) The whole of price has not been paid
(b) The same part of price has not been paid
(c) Half part of price has not been paid
(d) 25% of price has not been paid
92. The unpaid seller can exercise the right against the goods
(a) Rights of lien (b) Right of stoppage in transit
(c) Right of resale (d) All of these
93. The term goods under the Sale of Goods Act, 1930 does not include _________
(a) Goodwill and money (b) Stocks and shares
(c) Harvested crops (d) Any movable property
94. A contract for sale of future goods is ________
(a) Sale (b) Agreement to sell
(c) Hire purchase agreement (d) Quasi Contract
95. A stipulation in a contract of Sale of goods where violation by seller gives a right of recision
to buyer, is called _______
(a) Guarantee (b) Warrantee
(c) Condition (d) Term

96. The Sale of Goods Act, 1930 deals with the ________
(a) Movable goods only
(b) Immovable goods only
(c) Both immovable and movable goods
(d) Tangible goods only
97. A stipulation which is collaterals to the main purpose of contract gives the buyer only right
to claim the damages, is known as ______
(a) Condition (b) Guarantee
(c) Warranty (d) Agreement to sell
98. The number of partners in firm carrying any banking business should not exceed
(a) 20 persons (b) 15 persons
(c) 10 persons (d) 30 persons
99. A enters into a contract with B for the sale of goods to be delivered at a future date decide
which type of case is this:
(a) It is a case of wagering agreement
(b) it is a case of future consideration
(c) It is a case of contingent contract
(d) It is impossible agreement to be performed
100. A entered into a contract with B for the supply of certain things manufactured by ‘C’. ‘C’
did not manufacture those goods what is your advise:–
(a) A is discharged from his obligation
(b) A is not discharged from his obligation and is liable to ‘B’ for damages
(c) B can say to A to get manufactured the goods from other party
(d) Contract becomes void.
101. Which of the following curve cannot be u-shaped?

(a) Average total cost (b) Average variable cost
(c) Average fixed cost (d) Marginal cost
102. The meaning of the word ‘Economic’ is most closely connected with the word :
(a) Extravagant (b) Scarce
(c) Unlimited (d) Restricted
103. The average fixed cost :
(a) remains the same whatever the level of output
(b) increase as output increases

(c) diminishes as output increases

104. Average variable cost curve :
(a) slopes downwards at first and then upwards
(b) slopes upwards, then remains constant and then falls
(c) slopes downwards
105. If a firm produces zero output in the short period :
(a) its total cost will be zero (b) its variable cost will be positive
(c) its fixed cost will be positive (d) its average cost will be zero
106. The average total cost of producing 50 units is Rs. 250 and total fixed cost is Rs.1000. What
is the average fixed cost of producing 100 units?
(a) Rs.10 (b) Rs.30
(c) Rs.20 (d) Rs.5
107. The MC curve cuts the AVC and ATC curves
(a) at different points (b) at the falling parts of the each curve
(c) at their respective minima (d) at the rising parts of each curve
108. Demand curve in most cases slopes
(a) downward towards right (b) vertical and parallel to Y-axis
(c) upward towards left (d) horizontal and parallel to X-axis
109. The concept of elasticity of demand was developed by :
(a) Alfred Marshall (b) Edwin Camon
(c) Paul Samuelson (d) Fredric Bonham
110. Price elasticity of demand is defined as
Changein quantity demanded

(a)
Changein price
Proportionate change in quantity demanded
(b)
Changein price
Changein quantity demanded
(c)
Proportion change in price
Proportion changein quantity demanded
(d)
Proportion change in price

111. Under marginal utility analysis, utility is assumed to be a
(a) cardinal concept (b) ordinal concept
(c) indeterminate concept (d) none of the above
112. The utility may be defined as
(a) the power of commodity to satisfy wants
(b) the usefulness of a commodity
(c) the desire for a commodity
113. Marginal utility of a commodity depends on its quantity and is
(a) inversely related to its quantity
(b) not proportional to its quantity
(c) independent of its quantity
114. Consumer’s surplus is the highest in the case of
(a) necessities (b) comforts
(c) luxuries (d) capital goods
115. Consumer stops purchasing the additional units of the commodity when -
(a) marginal utility starts declining
(b) marginal utility become zero
(c) marginal utility is equal to marginal utility of money
(d) total utility is increasing
116. Indifference curve approach assumes
(a) consumer has full knowledge of all relevant information
(b) all commodities are homogenous and divisible
(c) prices of commodities remain the same throughout the analysis
117. The ‘substitution effect’ takes place due to change in
(a) income of the consumer
(b) prices of the commodity
(c) relative prices of the commodities
118. Under income effect, consumer
(a) moves along the original indifference curve
(b) moves to higher or lower indifference curve
(c) always purchases higher quantities of both the commodities

119. In a perfect competitive market :

(a) firm is the price-giver and industry the price taker
(b) firm is the price taker and industry the price giver
(c) both are the price takers
120. One of the essential conditions of perfect competition is -
(a) product differentiation
(b) multiplicity of prices for identical product at any one time
(c) many sellers and few buyers
(d) only one price for identical goods at any one time
121. Under the perfect competition a firm will be in Equilibrium when :
(a) MC = MR
(b) MC cuts the MR from below
(c) MC is rising when it cuts the MR
122. Which of the following influences most the price level in the very short-run period?
(a) demand (b) supply
(c) cost (d) production
123. Long-run normal prices is that which is likely to prevail
(a) all the times (b) in market period
(c) in short-run period (d) in long-run period
124. A perfectly competitive firm has control over
(a) price
(b) production as well as price
(c) control over production, price and consumers
125. By imperfect monopoly, we mean
(a) It is possible to substitute the monopolized product with another monopolized product
(b) Entry of new firms is possible to produce the same product
(c) The amount of output produced is very small
126. The demand curve facing an industrial firm under monopoly is a/an -
(a) horizontal straight line (b) indeterminate
(c) downward sloping (d) upward sloping

127. The degree of monopoly power is measured in terms of difference between
(a) Marginal cost and the price
(b) Average cost and average revenue
(c) Marginal cost and average cost
(d) Marginal revenue and average cost
128. A monopoly producer usually earns ______ even in the long run
(a) super normal profits (b) only normal profits
(c) losses (d) none of the above
129. Price discrimination is not possible :
(a) under monopoly situation (b) under any market firm
(c) under monopolistic competition (d) under perfect competition
130. Discriminating monopoly is possible if two markets have :
(a) rising cost curves (b) rising and declining cost curves
(c) different elasticities of demand (d) equal elasticities of demand
131. Consumer’s surplus left with the consumer under price discrimination is :
(a) maximum (b) minimum
(c) zero (d) not predictable
132. A firm under monopolistic competition advertises :
(a) as it has no control over the price of its product
(b) to lower its cost of production
(c) to increase its sales and profit
(d) because it cannot raise price
133. In short run, a firm in monopolistic competition
(a) always earns profits
(b) incurs losses
(c) earns normal profit only
(d) may earn normal profit, super normal profit or incur losses
134. In long-run, all firms in monopolistic competition
(a) earn super normal profits
(b) earn normal profits
(c) incur losses
(d) may earn super normal profit, normal profit or in incur losses
135. Differentiated oligopoly is one where there are
(a) many sellers producing homogeneous product
(b) few sellers producing homogenous product

(c) many sellers producing differentiated product

(d) few sellers producing differentiated product
136. Per capita national income means __________
(a) Total capital / Population (b) Population / NNP
(c) Personal Income / Population (d) NNP / Population
137. Which one of the following is not a cause of poverty in India?
(a) abundant population
(b) abundant natural resources
(c) abundant inequalities to distribution of income
(d) abundant surplus manpower in agriculture
138. The most important remedy to the problem of poverty in India is :
(a) changes in the ownership pattern
(b) higher productivity
(c) re-distribution of income through fiscal, pricing and other measures
139. Which is the central bank of India?
(a) The State Bank of India (b) The U.N.O.
(c) The World Bank (d) The Reserve Bank of India
140. Growth rate of population can be measured by
(a) division of death rate by birth rate
(b) multiplication of death rate by birth rate
(c) addition of death rate and birth rate
(d) subtraction of death rate from birth rate
141. Infant mortality rate refers to :
(a) the number of children dying before reaching the school going age
(b) the number of children dying before reaching 3 years of age
(c) the proportion of children dying within a year of their birth
142. Density of population indicates the
(a) Capital - and ratio
(b) Land - output ratio
(c) Land - labour ratio
(d) the number of person per square kilometre
143. Occupational structure refers to the
(a) number of people living in a country
(b) size of working force in a country

(c) distribution of working force among the different occupations
(d) occupations available in a country
144. The last All India population census was conducted in the year :
(a) 2005 (b) 2001
(c) 2011 (d) 1991
145. The population of India in 2012-13 was more than__________
(a) 100 crores (b) 101 crores
(c) 102 crores (d) 125 crores
146. According to 2001 census, density of population per square kilometre in India was _____
(a) 225 (b) 280
(c) 324 (d) 330
147. The real determinant of the size of market in a country is the
(a) income of its population (b) geographical area
(c) size of its population (d) income of the government
148. The occupational structure of India’s labour force since 1951 has
(a) changed significantly
(b) remained more or less static
(c) moved against services and in favour of agriculture
(d) shown trends which cannot be titled in any pattern
149. Which of the following is correct?
(a) Nearly half of the population pays income tax in India.
(b) Less than 5 percent of population pays income tax in India.
(c) India is a zero tax economy
(d) Name of the above
150. As per 2001 census, Kerala had _____ females for 1000 males
(a) 933 (b) 1006
(c) 1036 (d) 1058
dy
151. If y = 5xx, then is equal to _____
dx
(a) 5xx(1– log x) (b) 5xx–1
(c) 5xx(1+ log x) (d) None of these

3
+bx 2 +cx+ d
dy
152. If y = e ax then
dx
is _______
(a) (3ax2 + 2bx + c)y (b) 3ax2 + 2bx + c

3
(c) + b x 2 + cx + d (d) None of these
e ax
2
 1
153.   x – x  dx is equal to ____
x3 1 x3 1
(a)  2x   c1 (b)  2x   c1
3 x 3 x
x3 1
(c)  2x   c1 (d) None of these
3 x
154. The best method to collect data in case of a natural calamity is ________?
(a) Telephone interview (b) Indirect interview
(c) Personal interview (d) All these
155. If the A.M. and G.M. of two observations are 5 and 4 respectively, then the two observations
are ________
(a) 8, 2 (b)7, 3
(c) 6, 4 (d)5, 5
156. For the numbers 1, 2, 3 ……, n standard deviation is ______
n2  1 n2 1
(a) (b)
12 12
n2 1
12
157. For a group of 8 students, the sum of squares of differences in ranks for Economics and
English marks was 50. The value of rank correlation coefficient is ________.
(a) 0.40 (b)0.50
(c) 0.30 (d)None of these

158. A number is selected from the numbers 1, 2, 3, 4 ….., 25.The probability for it to be divisible
by 4 or 7 is ____.
3 9
(a) (b)
25 25
1
(c) (d)None of these
25
159. If 15 days are selected at random, then the probability of getting two Fridays are _________
(a) 0.13 (b)0.19
(c) 0.29 (d)0.39
160. A company estimates the mean life of a drug under typical weather conditions. A simple
random sample of 81 bottles yields the following information
Sample mean = 23 months,
Population variance = 6.25 (months)2
The interval estimate with a confidence level of 90% is _________
(a) [22.543, 23.457] (b) [22.6421, 23.5481]
(c) [22.451, 22.523] (d) None of these
161. The value of 5-1(54)1/4 is _________
(a) 1 (b)5
(c) 0 (d)None of these
162. The value of 3(256)–1/8 is _________
2 3
(a) (b)
3 2
1 1
163. The value of (243) 5 (128) 7 is _________
(a) 1 (b)6
(c) 2 (d)3
164. log (12 + 22 + 32) is equal to _________
(a) log 12 + log 22 + log 32 (b) log 2 + log 7
(c) log 2 – log 7 (d) None of these
165. log (3 × 5 ×7)2 is equal to _________
(a) 2(log 3 + log 5 + log 7) (b) log (2×3×5×7)
(c) 2(log 3 – log 5 – log 7) (d) None of these

166. The solution of the equation x3 – 5x2 + 6x = 0 is _________

(a) 2, 3 (b) 0, –2, –3
(c) 0, 2, 3 (d) None of these
167. The equation y3 – 7y + 6 = 0 is satisfied by _________
(a) 1, 2, –3 (b) 1, 2, 3
(c) –1, –2, 3 (d) 1, –2, 3
168. The equation x3 – x2 – 12x = 0 is satisfied by _________
(a) 1, 4, –3 (b) 0, 4, –3
(c) 0, –4, 3 (d) None of these
169. The solution of the equation (x – 3) (x – 5) (x – 7) = 0 is _________
(a) 3, 5, 7 (b) –3, –5, –7
(c) 3, –5, –7 (d) –3, –5, 7
170. The roots of the equation x2 – 18x + 81 = 0 are _________
(a) Imaginary and unequal (b) Real and unequal
(c) Real and equal (d) None of these
171. The roots of the equation 23–y + 2y–2 – 3 = 0 are _________
(a) –2, –3 (b) 2, 3
172. If one root of the quadratic equation is 2  3 , the equation is _________
(a) x² – 4x + 1 = 0 (b) x² + 4x + 1 = 0
(c) x² – 4x – 1 = 0 (d) None of these
173. The inequalities x < 0, y > 0 represents _________
174. The inequalities x > 0, y < 0 represents _________
175. Simple interest on Rs. 50,000 for three years at interest rate of 5.5% p.a. is _________
(a) Rs. 8250 (b) Rs. 825
(c) Rs. 8520 (d) None of these

176. Rs. 1000 is invested at annual rate of interest of 10% p.a. The amount after two years if
compounding is done annually is _________
(a) Rs. 121 (b) Rs. 1210
(c) Rs. 2110 (d) None of these
177. Rs. 2,000 is invested at annual rate of interest of 10% p.a. The amount after two years if
compounding is done half yearly is _________
(a) Rs.2431 (b) Rs.243.10
(c) Rs.2341 (d) None of these
compounding is done quarterly is _________
(a) Rs. 3556.20 (b) Rs. 3565
(c) Rs. 3655.20 (d) None of these
compounding is done monthly is _________
(a) Rs. 4881.16 (b) Rs. 4818.16
(b) Rs. 4888.16 (d) None of these
180. 0 × 7 × 2 is equal to _________

(a) 10080 (b) 0
181. If n + 1 = 20 n  1 , then value of n is
(a) 6 (b)5
182. The value of 11P9 is equal to
11 11
(a) (b)
9 2 2
11 2
9
183. In how many different ways can seven persons stand in a line for a group photograph?
(a) 5040 (b)720
(c) 120 (d)27

184. In how many ways can 11 persons sit at a round table?
(a) 11 (b) 10
(c) 11 (d) 10
185. There are 5 books on Physics, 3 on Chemistry and 2 on Mathematics. In how many ways can
these be placed on a shelf if the books on the same subject are to be together?
(a) 8640 (b) 1440
186. How many different numbers can be formed by using any four out of six digits
1, 2, 3, 4, 5, 6, no digit being repeated in any number?
(a) 60 (b) 120
(c) 30 (d) 15
187. How many five digit numbers can be formed out of digits 1, 2, 4, 5, 6, 7, 8, if no digit is
repeated in any number?
(a) 2520 (b) 840
188. A Committee of 7 persons is to be formed out of 11. The number of ways of forming such a
committee is _________
(a) 660 (b) 330
189. How many different arrangements are possible from the letters of the word CALCULATOR?
(a) 453600 (b) 50400
190. A man has 7 friends, in how many ways can he invite one or more of his friends?
(a) 127 (b) 256
191. There are 7 boys and 3 girls. The number of ways, in which a committee of 6 can be formed
from them, if the committee is to include at least 2 girls, is _________
(a) 140 (b) 105
5
192. C1+ 5C2+ 5C3+ 5C4+ 5C5 is equal to _________
(a) 30 (b) 31
(c) 32 (d) 25

193. The 20th term of the A.P. 1, 3, 5, 7, ….. is
(a) 39 (b) 37
194. The sum of the series 1,2,3,4,….., 70 is equal to _________
(a) 2484 (b) 2485
195. The Arithmetic mean between 5 and 13 is _________
(a) 9 (b) 10
196. The sum of the series 1, 3, 5, 7, …. , 99 is equal to _________
(a) 2499 (b) 2501
197. The series 12 + 22 + 32 + 42 + ... + 102 is equal to
(a) 385 (b) 386
198. The series 13 + 23 + 33 + ... + 203 is equal to
(a) 4410 (b) 4410000
1
199. The eleventh term of the G.P. , 1, 2, 2², ……. nth term is
2
(a) 512 (b) 256
200. The sum of the series 1,2,4,8, …. nth term to 10 term is
(a) 1024 (b) 1023



BOARD OF STUDIES
1. Rings and pistons of an engine were changed at a cost of Rs. 5,000 to increase fuel efficiency
is:
(c) Deferred revenue expenditure (d) None of the above
2. Which of the following is nominal account
(a) Trade receivables account (b) Loan account
(c) Bad debts account (d) Bank overdraft
3. Unexpired portion of Capital expenditure is shown in
(a) Trading account (b) Profit and Loss a/c
4. On 01.09.2011, A draws a bill on B “for 30 days after sight”. The date of acceptance is
08.09.2011. The maturity date of the bill will be
(a) 08.10.2011 (b) 10.10.2011
(c) 11.10.2011 (d) 09.10.2011
5. If the firm pays Income Tax on behalf of partners, such payment of personal income tax
should be treated as
(a) Income tax of firm (b) Drawings of partners
(c) Income of the firm (d) None of the above

6. Which of the following account will have credit balance?

(a) Debentures A/c (b) Carriage inward
(c) Prepared insurance (d) Bills receivable
7. The book value of the assets as on 1st April, 2011 is Rs. 1,00,000. Depreciation is charged
on the assets @ 10%. On 1st October, 2011, the asset is sold for Rs. 64,000. Profit or
Loss on the sale will be
(a) Rs. 30,000 (b) Rs. 31,000
8. Three column cash book records

(a) Only cash transactions (b) All transactions
(c) Cash, Bank and discount transactions
(d) Cash purchases and cash sale transactions
9. The value of an asset after reducing depreciation from the historical cost is known as
(a) Fair value (b) Book value
(c) Market value (d) Net realizable value
10. Trial Balance is prepared according to

(a) Total method (b) Balance method
(c) Total and Balance both (d) All the three.
11. Selection of accounting policies is based on:
(a) Prudence (b) Substance over form
(c) Materiality (d) All of the above
12. Which of the followings is a valuation principal?

(a) Historical cost (b) Current cost
(c) Realisable value (d) All of the above
13. Profit or loss on revaluation is shared among the partners in
(a) Old profit sharing ratio (b) New profit sharing ratio
(c) Capital ratio (d) Equal ratio
14. In case of admission of a partner, the first account prepared is

(a) Revaluation account (b) Realisation account
(c) Profit and Loss adjustment account (d) Bank account
15. After the death of a partner, amount payable is received by

(a) Government (b) Firm
(c) Executor of the dead partner (d) None of the three

16. A company purchased a plant for Rs. 5,000. The useful life of the plant is 10 years and the
residual value is Rs. 500. SLM rate of depreciation will be
(a) 9% (b) 8%
(c) 10% (d) None of the three
17. When preparing a Bank Reconciliation Statement, if you start with credit balance as per
Pass Book, then cheque deposited in the bank but not credited within the period are
(a) Added (b) Deducted
(c) Not required to be adjusted (d) None of the above
18. Debit balance of the cash is

(a) An expense (b) Income
(c) An asset (d) Liability
19. When balance as per Cash book is the starting point, Dividend collected by bank is:
(a) Added in the bank reconciliation statement
(b) Subtracted in the bank reconciliation statement
(c) Not required to be adjusted in the bank reconciliation statement
20. Outgoing partner is compensated for parting with firm’s future profits in favour of remaining
partners. The remaining partners contribute to such compensation amount in
(a) Capital ratio (b) Sacrificing ratio

(c) Gaining ratio (d) Profit sharing ratio
21. Sometimes, in case of admission of a partner, all partners may agree to show the assets and
liabilities in the new balance sheet at their old figures even when they agree to revalue them.
This A/c is prepared only when it is mentioned that assets and liabilities other than cash not
to be altered in new balance sheet. The account is known as
(a) Memorandum Revaluation A/c (b) Revaluation A/c
(c) Profit & Loss Adjustment A/c (d) None of the above
22. In case of Private companies shares are:
(a) Listed in BSE (b) Listed in NSE
(c) Not listed in any stock exchange (d) None of the above

23. From the following figures prepare Balance Sheet of the Mr. X as on Dec. 31, 2009.
Rs. Rs.
Goodwill 70,000 Debtors 35,000
Plant & Machinery 60,000 Furniture 10,000
Investments 25,000 Bills payable 10,000
Outstanding expenses 5,000 Bills Receivable 9,000
Closing inventory 25,000 Cash 6,000
Creditors 45,000 Drawings 12,000
Net Profit 22,000 Capital 1,55,000
Balance Sheet total will be

(a) Rs. 2,40,000 (b) Rs. 2,50,000
24. Cost of goods sold Rs. 19,000

Closing inventory Rs. 6,000
Sales Rs. 30,000
Gross Profit will be
(a) Rs. 10,000 (b) Rs. 11,000

25. Rs. Rs.

Salaries 4,000 General expenses 5,100
Interest on overdraft 200 Advertisement 5,000
Office expenses 5,000 Gross profit 35,000
Rent paid 2,000 Commission received 4,000
Capital 50,000
Amount of net profit will be
(a) Rs. 17,700 (b) Rs.17,000


26. Trial Balance shows the following balance
Dr. Cr.
Rs. Rs.
Capital - 50,000
Income tax 10,000
Income tax advance payment 1,600
Capital A/c balance will be
(a) Rs. 38,400 (b) Rs. 38,000
27. As per trial balance Rs.

Jan 1, 2009 Provision for doubtful debts A/c 990
Dec. 31, 2009 Bad Debts 1,850
Dec. 3, 2009 Trade receivables 30,000
Information
(i) Make a provision for bad debts 5% on Trade receivables.
(ii) Make a provision for discount on Trade receivables 2%.
Provision for discount on Trade receivables will be
(a) Rs. 570 (b) Rs. 500
28. Rs. 50,000 claim for workman’s compensation under dispute is a

(a) Current liability (b) Contingent liability
(c) Fixed liability (d) None of the three
29. Loan @ 9% 10,000

Interest on loan 600
Outstanding interest on loan will be
(a) Rs. 300 (b) Rs. 250
30. Included in the sales were sale of goods of Rs. 5,000 on “Sale on approval” basis for which
consent of the customer was not received upto Dec. 31st. Goods sent on approval included
profits at 25% on cost. Inventory on approval will be
(a) Rs. 4,500 (b) Rs. 5,000
31. On 1st Jan. 2009 Loose Tools A/c showed the balance of Rs. 4,320. On 31st Dec. 2009 closing
balance of loose tools were Rs. 4,680.
During the year loose tools were purchased for Rs. 1,440. Depreciation on loose tools will be
(a) Rs. 1,080 (b) Rs. 1,200

32. Loan A/c credit balance on Dec. 31, 2009 15,000

Loan paid on June 30, 2009 4,000
Loan paid on Sept. 30, 2009 5,000
Interest on loan is to be charged 9% p.a.
Interest amount for the year 2009 will be
(a) Rs. 1,867.50 (b) Rs. 1,800

33. B/R from Mr. A of Rs. 1,000 was posted to the credit of Bills payable A/c and also credited to
the account of Mr. A. Rectifying entry will be
Rs. Rs.
(a) B/P Dr. 1,000
To A 1,000
(b) B/R Dr. 1,000
To A 1,000
(c) Bills Payable A/c Dr. 1,000
Bills Receivable A/c Dr. 1,000
To Suspense 2,000
34. An item of purchase of Rs. 151 was entered in the Purchase Book as Rs. 15 and posted
to Suppliers A/c as Rs. 51 rectifying entry will be
Rs. Rs.
(a) Purchase A/c Dr. 136
To Suppliers A/c 100
To Suspense A/c 36
(b) Purchases A/c Dr. 136
To Suppliers 136
(c) Purchase A/c Dr. 136
To Suppliers 136
35. The accountant of the firm M/s ABC is unable to tally the following trial balance.
S. No. Account heads Debit (Rs.) Credit (Rs.)
1. Sales 12,500
2. Purchases 10,000
3. Miscellaneous expenses 2,500
Total 10,000 15,000
The above difference in trial balance is due to
(a) Wrong placing of sales account

(b) Incorrect totalling.
(c) Wrong placing of miscellaneous expenses account
(d) Wrong placing of all accounts.

36. Sita and Gita are partnes haring profits and losses in the ratio of 3:2 having the capital of
Rs. 80,000 and Rs. 50,000 respectively. They are entitled to 9% p.a. interest on capital
before distributing the profits. During the year firm earned Rs. 7,800 after allowing interest
on capital. Profits apportioned among Sita and Gita is:
(a) Rs. 4,680 and Rs. 3,120 (b) Rs. 4,800 and 3,000
(c) Rs. 5,000 and Rs. 2,800 (d) None of the above.
37. Balance as per Cash Book on 31.03.2010 Rs. 10,000

Cheque issued and presented on 4th April Rs. 2,300
Cheque sent to bank but not credited Rs. 2,000
B/P paid by Bank not entered in cash Book Rs. 800
Balance on per pass book will be
(a) Rs. 9,500 (b) Rs. 9,000

38. Bank overdraft as per cash book on 31st Dec. 2010 Rs. 10,500
Cheque sent for collection but not collected Rs. 8,250
Cheque issued but not presented for payment Rs. 12,000
Balance as per pass book overdraft will be
(a) Rs. 6,750 (b) Rs. 6,500

39. Ram, the manager, is entitled to get a commission of Rs. 25 per article sold plus ¼th of the
amount by which the gross sales proceeds less total commission there on exceed a sum at the
rate of Rs. 125 per article sold. Ram sold 450 articles at Rs. 73,800. Commission amount will
be -
(a) Rs. 12,500 (b) Rs. 12,510
40. Vimal of Kanpur consigned to his agent Nirmal of Allahabad 100 machines at Rs. 500 each.
He paid the following expenses-packing charges Rs. 20 per machine, forwarding charges
Rs. 400 and freight Rs. 600
Nirmal received the consignment and paid Rs. 600 for cartage and octroi. He also paid Rs.
500 for godown charges. He sold 60 machines @ 700 per machine. He was entitled to a
commission of 6%. Profit on consignment will be
(a) Rs. 6,820 (b) Rs. 6,800

41. PARIKH & CO. of Nagpur consigned D of Delhi 1,000 Kgs. of Oil @ Rs. 13 per Kg.
Consignor spent Rs. 750 on cartage, Insurance and freight. On the way due to leakage
50 kg. of oil was spoiled (Normal loss) D spent Rs. 500 on Octroi and carriage. His
selling expenses were Rs. 400 on 800 Kg. of oil sold. Value of consignment inventory
will be
(a) Rs. 2,250 (b) Rs. 2,000
42. Cost of machine Rs.1,35,000. Residual value Rs. 5,000. Useful life 10 years the company
charged depreciation for the first 5 years on straight line method. Later on, it reviewed the
useful life and decided to take it as useful for another 8 years. Depreciation amount for 6th
year will be.
(a) Rs. 8,125 (b) Rs. 8,000
43. Goods returned to supplier is an example of:
(a) Increase in Asset & Owner’s Equity

(b) Decrease in Asset & Owner’s Equity
(c) Increase in Liability & Owner’s Equity
(d) Decrease in Liability & Increase in Owner’s Equity
44. A and B enter into a joint venture sharing profit and losses in the ratio of 2:1:. A purchased
goods costing Rs. 2,00,000. B sold the goods for Rs. 2,50,000. A is entitled to get 1%
commission purchase and B is entitled to get 5% commission on sales. The profit on
venture will be
(a) Rs. 35,500 (b) Rs. 35,000
45. Capital introduced in the beginning by Shyam Rs. 12,000; Further capital introduced during
the year Rs. 4,000. He made drawings of Rs. 3,000 and closing capital is Rs. 16,430. The
amount of profit for the year will be
(a) Rs. 3,000 (b) Rs. 3,430

46. A and B are partners, sharing profits in the ratio 5:3. They admit C with 1/5 share in profits,
which he acquires equally from both i.e. 1/10 from A and 1/10 from B. Now profit sharing
ratio will be
(a) 21:11:8 (b) 11:21:8


47. A and B are partners in a firm sharing profits and losses in the ratio of 3:2. A new partner
C is admitted. A surrenders 1/5th share of his profit in favour of C and B surrenders 2/5th
share of his profit in favour of C. New profit sharing ratio will be
(a) 12:6:7 (b) 12:5:6
48. The profits of a firm for the last 5 years were as follows:
Year ended 31st March Profits (Rs.)
2005 43,000
2006 50,000
2007 52,000
2008 65,000
2009 85,000
Goodwill is to be calculated on the basis of two years purchase of weighted average profits.
The weights to be used are
2005 2006 2007 2008 2009
1 2 3 4 5
Goodwill amount will be
(a) Rs. 1,31,200 (b) Rs. 1,30,000

49. Ramesh and Suresh are partners sharing profits in the ratio of 2/3 and 1/3. Their capitals
on Dec. 31, 2009 were Rs. 1,02,900 and Rs. 73,500 respectively. Mohan was admitted as a
new partner on Jan. 1, 2010 for 1/5 share. He contributes Rs. 15,210 as goodwill. He brings
his capital in profit sharing ratio. Capital amount will be.
(a) Rs. 44,100 (b) Rs. 47,000
50. Goods purchased Rs. 3,00,000; sales Rs. 2,70,000. If margin 20% on sales then closing
inventory will be
(a) Rs. 84,000 (b) Rs. 80,000
51. A’s acceptance to B for Rs. 2,500 discharged by a cash payment of Rs. 1000 and a new bill
for the balance plus Rs. 50 for interest. The amount of the new bill will be
(a) Rs. 2,550 (b) Rs. 1,550

52. Ramesh, an employee gets a salary of Rs. 10,000, he withdrew goods of Rs. 7,000 (cost
price Rs. 6,000) for personal use and got salary Rs. 6,000. The excess payment will be
(a) Rs. 2,000 (b) Rs. 3,000
53. Mr. A receives a bill from B for Rs. 30,000 on 01.01.2010 for 3 months. On 04.02.2010.
Mr. A got the bill discounted at 12%. The amount of discount will be
(a) Rs. 900 (b) Rs. 300
(c) Rs. 600 (d) Rs. 650
54. Chandra Ltd. issued 15,000 equity shares of Rs. 100 each at par. Payments were made
as - on application Rs. 30; on allotment Rs. 35 and Rs. 35 on first and final call. Applications
for 14,000 shares were received and all were accepted. All the money was duly received
except the first and final call on 200 shares cash book balance will be
(a) Rs. 13,93,000 (b) Rs. 13,00,000
55. X Ltd. forfeited 100 shares of Rs. 10 each issued at par to Ravi on which he had paid Rs.
2.50 per share on application and Rs. 2.50 per share on allotment. But on which he had
not paid Rs. 3 on first call, Share capital in case of forfeiture will be debited by
(a) Rs. 800 (b) Rs. 600
56. B Ltd. forfeited 500 shares of Rs. 10 each fully called up for non payment of first call of
Rs. 2 per share. All these shares were reissued as fully paid for Rs. 8 per share. Amount
transferred to capital reserve will be
(a) Rs. 3,000 (b) Rs. 1,800
57. The Promising Co. Ltd. took over assets of Rs. 3,50,000 and liabilities of Rs. 30,000 of X Ltd.
for a purchase consideration of Rs. 3,30,000. The Promising Co. Ltd. paid the purchase
consideration by issuing 12% debentures of Rs. 100 each at 10% premium. Number of
Debentures issued will be
(a) 3,000 debentures (b) 3,100 debentures
(c) 2,800 debentures (d) None of the three
58. A Company issued 2,000, 12% debentures of Rs. 100 each at par but redeemable at 5%
premium. Loss on issue of debentures will be
(a) Rs.10,000 (b) Rs.12,000

59. On 1st Jan. 2010, a Limited Co. issued 14% Rs. 1,00,000 debentures at a discount of 6%
repayable at the end of 5 years. Amount of discount to be written off every year will be
(a) Rs. 1,200 (b) Rs. 1,000
60. The Company issued debentures of the face value of Rs. 1,00,000 at a discount of 6% on 1st
January, 2004. These debentures are redeemable by annual drawings of Rs. 20,000 made on
31st Dec. each year. The Directors decided to write off discount based on the debentures
outstanding each year. Discount to be written off in the fifth year will be
(a) Rs. 400 (b) Rs. 500
61. Which does not came into the category of delivery?

(a) Actual (b) Symbolic
(c) Constructive (d) Perpetual
62. Which is not true in case of a finder of goods?
(a) He can sell goods if the owner cannot be found
(b) He can sell the goods if the owner is found and he refuses to pay lawful charges
(c) He can sell the goods if the goods are of perishing nature
(d) He cannot sell the goods in any condition
63. In C.I.F. Contracts, C.I.F. stands for:
(a) Cost, Identify and Freight
(b) Colour, Insurance and Freight
(c) Cost, Insurance and Freight
(d) Calculation, Insurance and Freight
64. Which does not relate the term delivery of goods?
(a) Actual delivery (b) Symbolic delivery
(c) Constructive delivery (d) Specific delivery
65. Which is true regarding the expulsion of a partner?
(a) The expulsion must be in the interest of the partnership
(b) The partner to be expelled is served with notice
(c) He should be given an opportunity of being heard
(d) All of these

66. Which of the following is an essential feature of partnership?

(a) Registration (b) Partnership deed
(c) Test of mutual agency (d) Separate legal entity
67. A agrees to pay one crore to B if he brings on earth a star from sky. This is a
(a) Contingent contract (b) Quasi contract
(c) Implied contract (d) Wagering conduct
68. A party entitled to rescind the contract, loses the remedy where
(a) He has ratified the contract
(b) Third party has acquired right in good faith
(c) Contract is not separable
(d) All of these
69. Agreement of uncertain meaning is
(a) Valid (b) Void
(c) Voidable (d) Illegal
70. Where the consent of both the parties is given by mistake, the contract is:
(a) Void (b) Valid
71. A contract made by mistake about some foreign law is
(a) Void (b) Valid
72. A agrees to pay Rs. 5,000 to B if it rains and B promises to pay a like amount to A if it does
not rain, the agreement is called.
(a) Quasi contract (b) Contingent contract
(c) Wagering agreement (d) Voidable contract
73. In case of illegal agreements, the Collateral agreements are
(a) Voidable (b) Void
(c) Valid (d) None of these
74. Consideration must move at the desire of the
(a) Promisor (b) Promisee
(c) Any person (d) Third party
75. Which partner does not take active part in the business
(a) Minor partner (b) Sub partner
(c) Dormant partner (d) Estopped partner

76. Contingent contract is
(a) Illegal (b) Valid
(c) Voidable (d) Void
77. A partnership at will is one
(a) Duration not fixed
(b) Duration fixed
(c) Dissolved at any time
(d) Can be dissolved on the happening of an event
78. On dissolution the partners remain liable, till
(a) Accounts are settled (b) Partners dues are paid off
(c) Public notice is given (d) The registrar strikes off the name.
79. Every partner has the right
(a) To take part in the business of the firm
(b) To share exclusive profits
(c) To use the property of the firm for personal purpose
(d) None of these
80. A partner can retire on ________
(a) At the age of superannuation
(b) At the low ebb of capital a/c
(c) In accordance with the partnership deed
(d) On nominee becoming a partner
81. Each of the partner is ________
(a) Principals as well as agent (b) Only agents of the firm
(c) Only representative of the firm (d) Only co-partners of the firm
82. Registration of firm is ________
(a) Compulsory (b) Optional
(c) Occassional (d) None of these
83. The resconstitution of firm takes place in case ________
(a) Admission of partner (b) Retirement of a partner
(c) Death of a partner (d) All of the above
84. A partnership firm is dissolved where ________

(a) All partners have become insolvent
(b) Firms business has become unlawful
(c) The fixed term has expired
(d) All of these

85. It is not a right of partner ________

(a) To take part in business (b) To take access to accounts book
(c) To share profits (d) To receive renumeration
86. It is not included in the implied authority of a partner ________

(a) To buy or sell goods on account
(b) To borrow money for the purposes of firm
(c) To enter into partnership on behalf of firm
(d) To engage a lawyer to defend actions against firm
87. After retirement from firm, ________ partner is not liable by holding out
(a) Active partner
(b) Sleeping partner
(c) Representative of deceased partner
(d) Both (b) and (c)
88. ________ does not relate the dissolution of firm

(a) Dissolution by agreement
(b) Compulsory dissolution
(c) Dissolution in the happening of certain contingency
(d) Dissolution by leaving insolvent partner
89. ________ is the case of misconduct

(a) Gambling by a partner on stock exchange
(b) Fraudulent breach of trust by a partner
(c) Persistent refusal by a partner to attend to the business
(d) All of these
90. Every citizen is at liberty to conduct________
(a) Any profession (b) Lawful profession
(c) Business of his choice (d) Any business
91. A voidable contract ________
(a) Can be enforced at the option of aggrieved party
(b) Can be enforced at the option of both the parties
(c) Cannot be enforced in a court of law
(d) Is prohibited by court.
92. There can be a stranger to a ________
(a) Contract (b) Consideration
(c) Agreement (d) Promise

93. A minor is liable for ________ supplied to him
(a) Necessaries (b) Luxuries
(c) Necessities (d) All the things
94. Threat to commit suicide amounts to ________
(a) Coercion (b) Offence under the Indian Penal Code
(c) Undue influence (d) Fraud
95. An agreement the object of which is unlawful is ________
(a) Valid (b) Void
(c) Voidable (d) None of these
96. ________ can perform the contract
(a) Promisor alone (b) Legal representative of promisor
(c) Agent of the promisor (d) All of these
97. Consideration may be ________
(a) Past (b) Present
(c) Future (d) All of these
98. Moral pressure is involved in the case of ________
(a) Coercion (b) Undue influence
(c) Misrepresentation (d) Fraud
99. A sells to B a horse which A knows to be unsound. B is A’s daughter. Choose the best alternative
(a) The relation between A and B would make it A’s duty to tell B if the horse is unsound
(b) If A is silent, silence will not be equivalent to speech
(c) Here it is not duty of A to tell the horse’s defect
(d) A is not bound to tell the defect as the rule of caveat emptor applies
100. M, a minor aged 17, broke right arm in a cricket match. He engaged a physician to set it.
Does the physician have a valid claim for his services. Choose the best alternative.
(a) The physician cannot claim for his services due to contract with minor which is void
(b) The physician has a valid claim for his services which are included in the “Necessaries”
(c) The physician has no claim for minor’s “necessaries” and minor will be personally liable
(d) The physician can claim for his services from minor’s parents
101. The LAC curve

(a) Falls when the LMC curve falls
(b) Rises when the LMC curve rises
(c) Goes through the lowest point of the LMC curve
(d) Falls when LMC < LAC and rises when LMC > LAC

102. At shut down point :

(a) Price is equal to AVC (b) Total revenue is equal to TVC
(c) Total loss of the firm is equal to TFC (d) All of the above
103. If as a result of change in price, the quantity supplied of the good remains unchanged, we
say elasticity of supply is:
(a) Zero (b) Between zero and one
(c) Infinite (d) Between one and infinity
104. The conditions of long-period equilibrium for the firm operative under perfect competition
are:
(1) MC = MR
(2) AR = MR
(3) AC = AR
(4) AC = MC
(a) (1) only (b) (1) and (2) only

(c) (1), (2) and (3) only (d) (1), (2), (3) and (4)
105. In a perfect competitive market
(a) Firm is the price giver and industry the price take
(b) Firm is the price taker and industry the price giver
(c) Both are the price takers
106. If the price of Pepsi decreases relative to the price of Coke and Thumbs-Up, the demand
for:
(a) Coke will rise (b) Thumbs-Up will decrease
(c) Coke and Thumbs-Up will increase (d) Coke and Thumbs-Up will decrease
107. The difference between the price a consumer is willing to pay and the price he actually
pays is called -
(a) Excess price (b) Excess demand
(c) Consumer surplus (d) Exploitation
108. ‘Excess Capacity’ is the essential characteristic of the firm in the market form of :
(a) Monopoly (b) Perfect competition
(c) Monopolistic competition (d) Oligopoly
109. ‘Personal disposable’ ‘income’ refers to :
(a) The income of the person after all personal taxes are deducted
(b) Total income earned by the person
(c) Personal taxes paid to the government
(d) Personal and indirect taxes paid to the government

110. National income of a country is also known as :
(a) Gross National Product at market prices
(b) Net National Product at factor cost
(c) Gross Domestic Product at factor cost
(d) Net Domestic Product at Market prices
111. The indifference curve approach does not assume :
(a) Rationality on the parts of consumers
(b) Ordinal measurement of satisfaction
(c) Consistent consumption pattern behaviour of consumers
(d) Cardinal measurement of utility
112. The incidence of taxes refers to :
(a) The level and rate of taxation
(b) Who ultimately bears the money burden of the tax
(c) The growth of taxation
(d) The way in which a tax is collected
113. Which of the following is an example of perfect competition?
(a) Market for agricultural goods
(b) Market for soaps
(c) Market for petroleum products
(d) Market for clothes
114. The main objective of fiscal policy in developing countries is to :
(1) Promote economic growth
(2) Mobilise resources for economic growth
(3) Ensure economic growth and distribution
(4) Increase employment opportunities
(a) only 1 and 2 are correct (b) only 2 and 3 are correct
(c) only 2 and 4 are correct (d) 1, 2, 3 and 4 are correct
115. Budgetary deficit can be expressed as:
(a) The excess of pubic expenditure over public revenue
(b) The sum of deficit on revenue account and deficit on capital account
(c) That portion of government expenditure which is financed through the sale of 91 days
Treasury Bills and drawing down of cash balances
116. A Government budget is defined as:
(a) A description of the fiscal policies of the government and the financial plans
(b) A financial plan describing estimated receipts and proposed expenditures and Disbursement
under various heads

(c) Neither of the above

(d) Both (a) and (b) above
117. ________ depicts complete picture of consumer’s tastes and preferences
(a) Budget line (b) Average cost curve
(c) Indifference map (d) Marginal revenue curve
118 . Human Development Index (HDI) is a composite index of :
(a) Health, literacy and employment
(b) National income, size of population and general price level
(c) National income, per capita income and per capita consumption
(d) Physical resources, monetary resources and population size
119. The task of national income estimation to India is entrusted to the
(a) Indian Statistical Institute
(b) National Sample Survey Organization
(c) Central Statistical organization
(d) National Accounts Organization
120. The marginal farmer in India is defined as a cultivator who :
(a) Does not own any land
(b) Workers on a land holding of less than one hectare
(c) Works on a land holding for wages
(d) Keeps shifting between agriculture and non-agriculture jobs
121. The main objective of the Regional Rural Bank is to
(a) Provide credit and other facilities to small and marginal farmers, agricultural labours and
artisans in rural areas
(b) Provide credit to the common people in rural areas
(c) Take over the functions of Agricultural Refinance Corporation of India
(d) Supplement scheduled commercial banks
122. India currently ranks as the world’s _________ largest Energy producer.
(a) Tenth (b) Fourth
(c) Sixth (d) Second
123. The second plan’s programme of industrialization was based on the ______ model
(a) British (b) V.V. Bhatt
(c) P.C. Mahalanobis (d) Vera Anstey
124. An inferior commodity is one which is consumed in smaller quantities when the income of
consumer :
(a) Becomes nil (b) Remains the same
(c) Falls (d) Rises

125. Which of the following equation is correct?
PY PX
(a) MRTSXY = (b) MRTSX =
PX PY
PY
(c) MRTSYX = (d) None of the above
PX
126. The marginal cost curve intersects the average cost curve when average cost is:
(a) Maximum (b) Minimum
(c) Raising (d) Falling
127. If the demand curve confronting an individual firm is perfectly elastic, then :
(a) The firm is a price taker
(b) The firm cannot influence the price
(c) The firms marginal revenue curve coincides with its average revenue curve
128. In long run equilibrium the pure monopolist can make pure profits because of
(a) Blocked entry (b) The high price he charges
(c) The low LAC costs (d) Advertising
129. Which of the following statements is not true about a discriminating monopolist?
(a) He operates in more than one market
(b) He makes more profit because he discriminates
(c) He maximizes his profits in each market
(d) He charges different prices in each market
130. In both the Chamberlin and kinked demand curve models, the oligopolists
(a) Recognize their independence (b) Do not collude
(c) Tend to keep prices constant (d) All of the above
131. The demand for a factor of production is said to be a derived demand because
(a) It is a function of the profitability of an enterprise
(b) It depends on the supply of complementary factors
(c) Its stems from the demand for the final product
(d) It arises out of means being scarce in relation to wants.
132. Positive income elasticity implies that as income rises, demand for the commodity
(a) Rises (b) Falls
(c) Remains unchanged (d) Becomes zero

133. A Central Bank differs from a commercial bank in that :

(a) It has no branches
(b) It is the banker of the government
(c) It deals with general public
134. Open market operations by a Central bank involve :
(a) Sale and purchase of government securities
(b) Increase and decrease of discount rate
(c) Changing the reserve ratio up and down
(d) Raising or lowering of the margin requirements
135. Which one of the following is the most profitable but least liquid asset of a commercial
bank?
(a) Loans and advances
(b) Money at call and short notice
(c) Bills discounted and purchased
(d) Investment in government securities
136. CENVAT stands for :
(a) Common Entity Value Added Tax
(b) Corporate Entity Value Added Tax
(c) Central Value Added Tax
137. Export led growth strategy does not include :
(a) Outward oriented growth
(b) Export promotion
(c) Import restrictions
(d) Emphasizing comparative advantage
138. Which is the soft lending arm of the World Bank?
(a) IDA (b) IFC
(c) MIGC (d) ICSID
139. Occupational structure refers to the
(a) Number of workers living in a country
(b) Size of working population in the industrial sector
(c) Distribution of working population among different occupations
(d) Nature of different occupations in the economy
140. The ‘Year of Great Divide’ with regard to population growth in India is :
(a) 1911 (b) 1921
(c) 1947 (d) 1971

141. FIEO stands for :
(a) Foreign Import Export Organization
(b) Federation of Import Export Organization
(c) Forum of Indian Export Organization
(d) Federation of Indian Export Organization
142. The Eleventh Five Year Plan (2007-12) kept a target of a GDP growth rate ____
143. The major cause of unemployment in India is :
(a) Underdevelopment (b) Defective manpower planning
(c) Rapid population growth (d) All of the above
144. The largest share of foreign aid in India has been used in the programme of :
(a) Agriculture development (b) Industrial development
(c) Education (d) Health
145. Before financial reforms, the banking system was characterised by all of the following except :
(a) Administered interest rate structure
(b) Quantitative restrictions on credit flow
(c) High revenue requirements
(d) Keeping very less lendable resources for the priority sector
146. During ___ we had surplus in the current account.
(a) 2001-04 (b) 1991-93
(c) 1981-83 (d) 1971-73
147. Economic development has retarded in India mainly due to :
(a) Overgrowing service sector (b) Westernised social attitudes
(c) Poor infrastructural facilities (d) Modern agrarian system
148. India is termed as a developing economy because of her :
(a) Initiative for determined planned economic development
(b) Rapid population growth
(c) Predominant agrarian set-up
(d) Slow Industrial Progress
149. The percentage of people working in agriculture sector came down to around ________in
2013-14.

150. The Government aimed at reducing the Maternal Mortality Rate (MMR) to ______ per
1000 live births by the end of the Eleventh Plan.
(a) 5 (b) 1
(c) 2 (d) 3
1 1 1 1
151. The series     ........ to  is
3 32 33 34
1 1
(a) (b)
3 2
1
6
152. The series 1 + 10–1 + 10–2 + 10–3..... to  is
9 1
(a) (b)
10 10
10
9
153. The sum of the series 1,-1,1,-1,1…… to 100 terms is equal to
(a) 1 (b) –1
(c) 0 (d) 50
154. The sum of the series 1,-1,1,-1,1…… to 101 terms is equal to
(a) 1 (b) –1
(c) 0 (d) 100
155. If A = {1, 3, 5, 7, ……} and B= {2, 4, 6, 8, ……..}, then A  B is equal to
(a) Set of all natural members (b) Set of all integers
(c) Set of all numbers (d) Set of functions
156. If A = {1, 3, 5, 7, ……} and B= {2, 4, 6, 8, ……..}, then A  B is equal to
(a) Set of all integers (b) Set of all positive integers
(c)  (d) None of these
157. The set of squares of positive integers is
(a) A finite set (b) Null set
(c) An infinite set (d) None of these

158. If A = {1, 2, 3, 4, 5} and B = {6, 7, 8}, then cardinal number of AXB is:
(a) 15 (b) 5
(c) 3 (d) 8
159. If B is any set then B  B is

(a) Null Set (b) B
(c) Whole set (d) None of these
160. If B is any set then B  B is

(a) B (b) Null set
(c) Whole set (d) None of these
161. The number of subsets of the set A = {1, 2, 3, 4, 5, 6, 7, 8} is
(a) 36 (b) 128
 x2  25 
162. If f(x) =   , f(5) is
 x5 
(a) 1 (b) 0
(c) 10 (d) Undefined
 x2 – 4 
163. If f(x) =   , then f(2) is
 x–2 
(a) 0 (b) 2
(c) 4 (d) 1
5
164. If f(x) = , then f(0) is
x
(a) + (b) –
(c) 5 (d) Undefined
x2  1
165. If f(x) = , x  1, f(1) = A
x 1
For what value of A, f(x) is continuous at x = 1?
(a) 1 (b) 2

1
166. lim is
x 0 x
(a) + (b) –
(c) Doesnot exist (d) None of these
1
167. lim is
x  0 x
(a) + (b) –
(c) Does not exist (d) None of these
x 2  25
x 0  x  5
(a) does not exist (b) 1

(c) 10 (d) 0
x 2  6x + 9
169. Let f(x) = , x  3 , f(3) = 0, then f(x) is
x3
(a) Continuous at x = 3 (b) Discontinuous at x = 3
(c) Discontinuous for all x (d) None of these
1 + 2 + 3 + .... + n
x  n2
1
(a) 1 (b)
2
12 + 22 + 32 + .... + n 2
n  n3
1
(a) (b) 0
3
13 + 23 + 33 + .... + n3
n  n4
1
(a) (b) 1
4

173. If f(x) = 5x, when x > 0
= –5x, when x < 0
Then f(x) is
(a) Discontinuous at x = 0 (b) Discontinuous for all x
(c) Continuous at x = 0 (d) None of these
dy
174. If y = x5 + e 2x + log3x , then is
dx
1 1
(a) 5x 4 + 2e 2x + (b) x 5 + e2x +
x 3x
1
(c) 5x 4 + e 2x + (d) None of these
3x
dy
175. If y = a3x + 4x9 + 10,, then is
dx
(a) a3x + 36x9 + 10x (b) 3a3x loga + 36x8
(c) 3a3x log a + 36x8 + 10x (d) None of these
dy
176. If x = at2, y = 2at, then is equal to
dx
1
(a) (b) 2 at
t
a
(c) 2a (d)
t
dy
177. If x2 + y2 = a2, then at (–2, 2) is
dx
(a) 2 (b) 2
(c) 1 (d) 3
dy
178. If y = 2x2 + 3x + 10, then at (0,0) is
dx
(a) 10 (b) 0
179. The gradient of the curve y = x³ – x² at (0, 0) is
(a) 1 (b) 0
(c) –1 (d) None of these

  6x + 3e 2x + 5  dx is equal to
5
180. The value of
3
(a) x 6  e 2x  5x  k (b) 30x 4  6e 2x
2
3
(c) x 6  e ex (d) None of these
2
2
 1
181. The value of   x   dx is
 x
x3 1 x3 1
(a)  2x  (b)  2x   k
3 x 3 x
x2
(c) k (d) None of these
3
  5xe + 10  dx is equal to
x
182. The value of
(a) 5xex – 5ex +10x + c (b) 5xex + 5ex +5x + c
(c) xex – 5ex +10x + c (d) None of these
dx
183. The value of  x(x 2
– 1)
is equal to
1  1  1  1
(a) log  1  2  (b) log  1  2   k
2  x  2  x 
 1
(c) log  1  2  (d) None of these
 x 
1
184. The value of the integral  x log x dx is
1
(a) 2
c (b) log (x log x) (c)
 x log x 
(c) log (log x) + c, (d) None of these
1
x
185. The value of 
0 x  1–x
dx is
1
(a) (b) 1
2
(c) 2 (d) 0

1
186. The value of   2x + 5 
0
is
(a) 54 (b) 6
3
x+3
187. The value of  x + 1 dx
2
is
4 3
(a) 1 + 2 log (b) 1 – 2 log
3 4
4
(c) 1 + log (d) None of these
3
188. Statistics is applied in
(a) Psychology only (b) Commerce only
(c) Economics only (d) All these and in other subjects
189. The mean salary for a group of 4 male is Rs. 5200 per month and that for a group of 6
female is Rs. 6800 per month. What is the combined salary?
(a) Rs. 6,160 (b) Rs. 6,610
(c) Rs. 6,110 (d) None of these
190. For the numbers 1, 2, 3, 4, 5, 6, 7 standard deviation is:
(a) 3 (b) 4
191. If the quartile deviation of x is 8 and 3x + 6y = 20, then the quartile deviation of y is
(a) 4 (b) 3
192. For a group of 8 students, the sum of squares of differences in ranks for Economics and
Commerce marks was 50, the value of rank correlation coefficient is equal to
(a) 0.50 (b) 0.40
193. A number is selected from the set S = {1, 2, 3, 4 ….. 25}. The probability that it would be
divisible by 4 or 7 is
(a) 0.26 (b) 0.46

194. Suresh is selected for three different posts. For the first post there are 2 candidates, for
the second post there are 3 candidates, for the third post there are 10 candidates. The
probability, that Suresh would be selected, is
(a) 0.7 (b) 0.5
195. Eight balls are distributed at random in three containers. The probability, that the first
container would contain three balls, is
(a) 0.37 (b) 0.17
196. If 15 dates are chosen at random, then the probability of getting two Fridays is
(a) 0.13 (b) 0.38
197. Between 7 and 8 P.M., the average number of phone calls per minute is 4. The probability,
that during one particular minute there will be no phone calls, is
1
(a) e–3 (b)
e
(c) e–4 (d) None of these
2
–  t –10 
1 32
198. The points of inflexion of the normal curve f(t) = e aree
4 2
(a) 6, 14 (b) 5, 15
199. A population consists units a, b, c, d, e, f. The total number of all possible samples of size
four without replacement are
(a) 10 (b) 12
dy
200. If y = x10 + 5log 3x + 6e2x + 10 then is equal to
dx
5
(a) 10x 9  15x  12e2x (b) 10x 9   12e 2x
x
5
(c) 10x 9   6e 2x (d) None of these
x

Answer of Model Test Papers
Model Test Paper – BOS/CPT-1
SECTION – A : FUNDAMENTALS OF ACCOUNTING
1 (c) 2 (d) 3 (c) 4 (b) 5 (d)

6 (b) 7 (c) 8 (a) 9 (c) 10 (b)
11 (c) 12 (d) 13 (c) 14 (a) 15 (a)
16 (a) 17 (a) 18 (a) 19 (c) 20 (b)
21 (a) 22 (c) 23 (d) 24 (b) 25 (a)
26 (a) 27 (b) 28 (b) 29 (b) 30 (a)
31 (a) 32 (c) 33 (d) 34 (d) 35 (b)
36 (a) 37 (d) 38 (a) 39 (d) 40 (b)
41 (b) 42 (c) 43 (a) 44 (d) 45 (b)
46 (c) 47 (a) 48 (a) 49 (a) 50 (b)
51 (c) 52 (d) 53 (d) 54 (d) 55 (d)
56 (c) 57 (c) 58 (b) 59 (d) 60 (b)
SECTION – B : MERCANTILE LAWS
61 (c) 62 (d) 63 (a) 64 (b) 65 (d)

66 (d) 67 (b) 68 (c) 69 (a) 70 (b)
71 (c) 72 (b) 73 (d) 74 (b) 75 (d)
76 (d) 77 (a) 78 (c) 79 (a) 80 (c)
81 (b) 82 (a) 83 (a) 84 (a) 85 (c)
86 (c) 87 (a) 88 (b) 89 (b) 90 (c)
91 (b) 92 (b) 93 (c) 94 (d) 95 (c)
96 (a) 97 (b) 98 (d) 99 (b) 100 (b)

ANSWERS
SECTION – C : GENERAL ECONOMICS
101 (a) 102 (a) 103 (b) 104 (c) 105 (b)
106 (d) 107 (d) 108 (b) 109 (a) 110 (d)
111 (b) 112 (a) 113 (d) 114 (a) 115 (c)
116 (c) 117 (a) 118 (b) 119 (c) 120 (b)
121 (a) 122 (a) 123 (a) 124 (c) 125 (d)
126 (d) 127 (c) 128 (a) 129 (c) 130 (c)
131 (c) 132 (d) 133 (c) 134 (b) 135 (a)
136 (a) 137 (c) 138 (c) 139 (c) 140 (c)
141 (b) 142 (c) 143 (a) 144 (c) 145 (d)
146 (d) 147 (a) 148 (c) 149 (a) 150 (b)
SECTION – D : QUANTITATIVE APTITUDE
151 (d) 152 (d) 153 (b) 154 (a) 155 (b)
156 (d) 157 (b) 158 (a) 159 (b) 160 (a)
161 (d) 162 (b) 163 (a) 164 (a) 165 (b)
166 (a) 167 (d) 168 (a) 169 (b) 170 (a)
171 (b) 172 (c) 173 (a) 174 (d) 175 (a)
176 (c) 177 (a) 178 (a) 179 (b) 180 (b)
181 (b) 182 (c) 183 (c) 184 (a) 185 (d)
186 (c) 187 (c) 188 (c) 189 (b) 190 (a)
191 (c) 192 (a) 193 (b) 194 (a) 195 (a)
196 (c) 197 (c) 198 (a) 199 (b) 200 (a)

MODEL TEST PAPER–BOS/CPT-2
1 (d) 2 (b) 3 (c) 4 (d) 5 (d)

6 (c) 7 (a) 8 (b) 9 (b) 10 (c)
11 (a) 12 (a) 13 (a) 14 (c) 15 (a)
16 (b) 17 (c) 18 (a) 19 (c) 20 (a)
21 (a) 22 (c) 23 (d) 24 (a) 25 (a)
26 (d) 27 (a) 28 (b) 29 (c) 30 (a)
31 (c) 32 (a) 33 (d) 34 (b) 35 (a)
36 (a) 37 (a) 38 (a) 39 (b) 40 (a)
41 (a) 42 (a) 43 (a) 44 (c) 45 (c)
46 (a) 47 (b) 48 (a) 49 (a) 50 (a)
51 (b) 52 (b) 53 (c) 54 (a) 55 (b)
56 (c) 57 (b) 58 (a) 59 (b) 60 (a)
61 (c) 62 (d) 63 (d) 64 (a) 65 (c)

66 (d) 67 (c) 68 (a) 69 (d) 70 (a)
71 (d) 72 (d) 73 (c) 74 (b) 75 (d)
76 (c) 77 (a) 78 (d) 79 (d) 80 (b)
81 (d) 82 (b) 83 (c) 84 (b) 85 (d)
86 (a) 87 (b) 88 (c) 89 (c) 90 (b)
91 (c) 92 (a) 93 (b) 94 (c) 95 (a)
96 (a) 97 (d) 98 (d) 99 (a) 100 (a)

ANSWERS
101 (b) 102 (d) 103 (a) 104 (c) 105 (a)
106 (a) 107 (c) 108 (c) 109 (a) 110 (d)
111 (d) 112 (d) 113 (b) 114 (b) 115 (b)
116 (d) 117 (d) 118 (b) 119 (b) 120 (b)
121 (b) 122 (c) 123 (c) 124 (a) 125 (d)
126 (c) 127 (a) 128 (c) 129 (c) 130 (a)
131 (b) 132 (d) 133 (b) 134 (a) 135 (c)
136 (d) 137 (b) 138 (b) 139 (b) 140 (a)
141 (d) 142 (c) 143 (a) 144 (d) 145 (b)
146 (b) 147 (c) 148 (a) 149 (c) 150 (a)
151 (b) 152 (a) 153 (d) 154 (d) 155 (c)
156 (b) 157 (c) 158 (c) 159 (a) 160 (d)
161 (d) 162 (b) 163 (b) 164 (b) 165 (c)
166 (d) 167 (c) 168 (b) 169 (b) 170 (a)
171 (c) 172 (a) 173 (a) 174 (c) 175 (b)
176 (c) 177 (d) 178 (b) 179 (a) 180 (d)
181 (b) 182 (c) 183 (b) 184 (a) 185 (a)
186 (c) 187 (c) 188 (a) 189 (a) 190 (c)
191 (d) 192 (c) 193 (d) 194 (a) 195 (b)
196 (b) 197 (a) 198 (b) 199 (a) 200 (b)

1 (d) 2 (b) 3 (a) 4 (d) 5 (c)

6 (d) 7 (a) 8 (c) 9 (b) 10 (c)
11 (c) 12 (c) 13 (c) 14 (a) 15 (c)
16 (a) 17 (b) 18 (c) 19 (c) 20 (b)
21 (b) 22 (c) 23 (b) 24 (d) 25 (b)
26 (c) 27 (a) 28 (a) 29 (d) 30 (c)
31 (a) 32 (c) 33 (d) 34 (c) 35 (b)
36 (b) 37 (d) 38 (d) 39 (a) 40 (b)
41 (b) 42 (c) 43 (c) 44 (b) 45 (a)
46 (a) 47 (d) 48 (a) 49 (b) 50 (a)
51 (c) 52 (b) 53 (b) 54 (a) 55 (d)
56 (c) 57 (c) 58 (a) 59 (d) 60 (b)
61 (b) 62 (d) 63 (a) 64 (b) 65 (c)

66 (d) 67 (d) 68 (a) 69 (c) 70 (b)
71 (c) 72 (b) 73 (b) 74 (d) 75 (b)
76 (d) 77 (c) 78 (c) 79 (d) 80 (b)
81 (c) 82 (b) 83 (c) 84 (a) 85 (a)
86 (b) 87 (a) 88 (a) 89 (b) 90 (a)
91 (d) 92 (d) 93 (d) 94 (b) 95 (c)
96 (a) 97 (d) 98 (d) 99 (b) 100 (a)

ANSWERS
101 (c) 102 (a) 103 (b) 104 (a) 105 (d)
106 (a) 107 (b) 108 (b) 109 (c) 110 (d)
111 (d) 112 (b) 113 (c) 114 (a) 115 (d)
116 (c) 117 (a) 118 (b) 119 (b) 120 (d)
121 (d) 122 (b) 123 (b) 124 (b) 125 (c)
126 (a) 127 (a) 128 (c) 129 (c) 130 (a)
131 (b) 132 (b) 133 (d) 134 (b) 135 (d)
136 (c) 137 (d) 138 (d) 139 (c) 140 (b)
141 (c) 142 (c) 143 (a) 144 (a) 145 (b)
146 (a) 147 (c) 148 (a) 149 (d) 150 (d)
151 (d) 152 (b) 153 (c) 154 (a) 155 (d)
156 (a) 157 (d) 158 (d) 159 (a) 160 (c)
161 (b) 162 (b) 163 (a) 164 (c) 165 (b)
166 (a) 167 (a) 168 (d) 169 (b) 170 (b)
171 (a) 172 (b) 173 (c) 174 (c) 175 (a)
176 (b) 177 (b) 178 (c) 179 (c) 180 (c)
181 (b) 182 (b) 183 (c) 184 (a) 185 (c)
186 (c) 187 (b) 188 (b) 189 (b) 190 (b)
191 (b) 192 (b) 193 (c) 194 (c) 195 (c)
196 (c) 197 (d) 198 (b) 199 (c) 200 (c)

1 (d) 2 (b) 3 (a) 4 (c) 5 (c)

6 (a) 7 (a) 8 (b) 9 (d) 10 (d)
11 (b) 12 (c) 13 (a) 14 (c) 15 (a)
16 (d) 17 (c) 18 (b) 19 (b) 20 (d)
21 (c) 22 (b) 23 (d) 24 (b) 25 (c)
26 (a) 27 (d) 28 (d) 29 (d) 30 (b)
31 (b) 32 (a) 33 (d) 34 (c) 35 (a)
36 (b) 37 (c) 38 (c) 39 (b) 40 (c)
41 (b) 42 (b) 43 (b) 44 (c) 45 (a)
46 (b) 47 (c) 48 (c) 49 (a) 50 (b)
51 (c) 52 (c) 53 (d) 54 (b) 55 (a)
56 (c) 57 (b) 58 (c) 59 (a) 60 (a)
61 (a) 62 (d) 63 (a) 64 (b) 65 (c)

66 (d) 67 (d) 68 (b) 69 (c) 70 (a)
71 (c) 72 (d) 73 (c) 74 (d) 75 (a)
76 (d) 77 (d) 78 (b) 79 (c) 80 (b)
81 (a) 82 (a) 83 (c) 84 (b) 85 (a)
86 (b) 87 (b) 88 (b) 89 (b) 90 (b)
91 (c) 92 (d) 93 (b) 94 (c) 95 (a)
96 (c) 97 (d) 98 (b) 99 (a) 100 (a)

ANSWERS
101 (c) 102 (a) 103 (c) 104 (d) 105 (c)
106 (b) 107 (d) 108 (d) 109 (b) 110 (c)
111 (d) 112 (d) 113 (c) 114 (b) 115 (a)
116 (c) 117 (a) 118 (c) 119 (b) 120 (b)
121 (c) 122 (c) 123 (c) 124 (b) 125 (d)
126 (b) 127 (c) 128 (a) 129 (c) 130 (c)
131 (c) 132 (b) 133 (d) 134 (c) 135 (b)
136 (b) 137 (d) 138 (c) 139 (a) 140 (d)
141 (b) 142 (a) 143 (c) 144 (d) 145 (b)
146 (b) 147 (d) 148 (d) 149 (b) 150 (b)
151 (c) 152 (a) 153 (b) 154 (b) 155 (d)
156 (b) 157 (c) 158 (b) 159 (b) 160 (d)
161 (d) 162 (c) 163 (a) 164 (a) 165 (c)
166 (d) 167 (d) 168 (c) 169 (b) 170 (b)
171 (a) 172 (c) 173 (b) 174 (c) 175 (b)
176 (b) 177 (b) 178 (d) 179 (c) 180 (a)
181 (b) 182 (c) 183 (c) 184 (a) 185 (a)
186 (c) 187 (c) 188 (b) 189 (a) 190 (a)
191 (c) 192 (c) 193 (c) 194 (c) 195 (b)
196 (a) 197 (d) 198 (d) 199 (c) 200 (b)

1 (a) 2 (c) 3 (d) 4 (b) 5 (d)

6 (a) 7 (d) 8 (c) 9 (b) 10 (a)
11 (c) 12 (a) 13 (b) 14 (c) 15 (d)
16 (c) 17 (a) 18 (b) 19 (b) 20 (c)
21 (c) 22 (b) 23 (d) 24 (d) 25 (a)
26 (a) 27 (d) 28 (b) 29 (d) 30 (c)
31 (a) 32 (b) 33 (a) 34 (c) 35 (a)
36 (b) 37 (d) 38 (d) 39 (c) 40 (a)
41 (b) 42 (c) 43 (a) 44 (d) 45 (b)
46 (a) 47 (d) 48 (c) 49 (b) 50 (b)
51 (a) 52 (d) 53 (d) 54 (a) 55 (c)
56 (a) 57 (c) 58 (b) 59 (c) 60 (d)
SECTION – B : MERCANTILE AWS
61 (d) 62 (b) 63 (c) 64 (a) 65 (d)

66 (d) 67 (d) 68 (b) 69 (d) 70 (d)
71 (c) 72 (d) 73 (a) 74 (d) 75 (d)
76 (c) 77 (d) 78 (c) 79 (b) 80 (a)
81 (d) 82 (b) 83 (a) 84 (a) 85 (a)
86 (b) 87 (a) 88 (a) 89 (a) 90 (c)
91 (c) 92 (d) 93 (b) 94 (d) 95 (d)
96 (d) 97 (d) 98 (a) 99 (a) 100 (d)

ANSWERS
101 (c) 102 (d) 103 (a) 104 (b) 105 (c)
106 (b) 107 (b) 108 (c) 109 (d) 110 (b)
111 (d) 112 (b) 113 (d) 114 (b) 115 (a)
116 (b) 117 (a) 118 (a) 119 (b) 120 (a)
121 (b) 122 (c) 123 (a) 124 (c) 125 (a)
126 (a) 127 (a) 128 (a) 129 (b) 130 (a)
131 (c) 132 (d) 133 (b) 134 (b) 135 (d)
136 (d) 137 (d) 138 (d) 139 (d) 140 (c)
141 (c) 142 (d) 143 (c) 144 (b) 145 (d)
146 (a) 147 (a) 148 (b) 149 (c) 150 (b)
151 (b) 152 (a) 153 (c) 154 (a) 155 (d)
156 (c) 157 (c) 158 (d) 159 (d) 160 (d)
161 (b) 162 (b) 163 (c) 164 (b) 165 (a)
166 (b) 167 (a) 168 (a) 169 (d) 170 (c)
171 (d) 172 (a) 173 (b) 174 (a) 175 (a)
176 (a) 177 (c) 178 (c) 179 (a) 180 (d)
181 (d) 182 (d) 183 (c) 184 (a) 185 (b)
186 (b) 187 (b) 188 (c) 189 (a) 190 (c)
191 (b) 192 (b) 193 (a) 194 (c) 195 (c)
196 (a) 197 (c) 198 (a) 199 (c) 200 (b)

1 (d) 2 (d) 3 (c) 4 (d) 5 (d)

6 (a) 7 (c) 8 (d) 9 (c) 10 (b)
11 (b) 12 (b) 13 (a) 14 (b) 15 (b)
16 (b) 17 (c) 18 (c) 19 (c) 20 (d)
21 (c) 22 (b) 23 (b) 24 (b) 25 (d)
26 (c) 27 (a) 28 (b) 29 (b) 30 (c)
31 (c) 32 (a) 33 (b) 34 (d) 35 (c)
36 (b) 37 (d) 38 (c) 39 (c) 40 (b)
41 (a) 42 (c) 43 (b) 44 (c) 45 (c)
46 (d) 47 (b) 48 (d) 49 (c) 50 (c)
51 (c) 52 (d) 53 (b) 54 (d) 55 (c)
56 (c) 57 (d) 58 (c) 59 (b) 60 (d)
61 (b) 62 (c) 63 (c) 64 (b) 65 (d)

66 (c) 67 (d) 68 (b) 69 (d) 70 (d)
71 (b) 72 (d) 73 (a) 74 (b) 75 (b)
76 (d) 77 (a) 78 (d) 79 (b) 80 (a)
81 (a) 82 (a) 83 (b) 84 (a) 85 (b)
86 (a) 87 (b) 88 (d) 89 (d) 90 (b)
91 (a) 92 (d) 93 (c) 94 (a) 95 (b)
96 (c) 97 (d) 98 (d) 99 (a) 100 (b)

ANSWERS
101 (d) 102 (b) 103 (b) 104 (c) 105 (d)
106 (a) 107 (c) 108 (b) 109 (d) 110 (b)
111 (a) 112 (b) 113 (d) 114 (c) 115 (d)
116 (c) 117 (a) 118 (a) 119 (d) 120 (c)
121 (b) 122 (b) 123 (d) 124 (c) 125 (c)
126 (c) 127 (d) 128 (d) 129 (d) 130 (b)
131 (a) 132 (b) 133 (c) 134 (c) 135 (c)
136 (d) 137 (b) 138 (c) 139 (a) 140 (d)
141 (d) 142 (a) 143 (b) 144 (c) 145 (a)
146 (b) 147 (d) 148 (c) 149 (d) 150 (b)
151 (b) 152 (b) 153 (d) 154 (d) 155 (d)
156 (b) 157 (c) 158 (b) 159 (a) 160 (d)
161 (a) 162 (c) 163 (b) 164 (c) 165 (c)
166 (b) 167 (a) 168 (c) 169 (b) 170 (c)
171 (b) 172 (b) 173 (b) 174 (d) 175 (c)
176 (b) 177 (c) 178 (c) 179 (b) 180 (c)
181 (c) 182 (b) 183 (b) 184 (d) 185 (b)
186 (a) 187 (b) 188 (c) 189 (b) 190 (d)
191 (a) 192 (b) 193 (b) 194 (b) 195 (a)
196 (a) 197 (a) 198 (c) 199 (b) 200 (b)

1 (b) 2 (c) 3 (a) 4 (d) 5 (d)

6 (c) 7 (b) 8 (a) 9 (a) 10 (a)
11 (b) 12 (a) 13 (c) 14 (c) 15 (d)
16 (d) 17 (c) 18 (a) 19 (b) 20 (c)
21 (b) 22 (a) 23 (a) 24 (b) 25 (c)
26 (b) 27 (d) 28 (a) 29 (d) 30 (c)
31 (c) 32 (a) 33 (b) 34 (c) 35 (d)
36 (c) 37 (a) 38 (b) 39 (c) 40 (d)
41 (a) 42 (a) 43 (c) 44 (b) 45 (c)
46 (d) 47 (d) 48 (d) 49 (a) 50 (c)
51 (b) 52 (c) 53 (b) 54 (c) 55 (c)
56 (a) 57 (d) 58 (b) 59 (c) 60 (a)
61 (d) 62 (d) 63 (c) 64 (a) 65 (a)

66 (b) 67 (d) 68 (b) 69 (a) 70 (d)
71 (d) 72 (c) 73 (d) 74 (d) 75 (d)
76 (d) 77 (d) 78 (c) 79 (c) 80 (c)
81 (d) 82 (d) 83 (b) 84 (c) 85 (d)
86 (d) 87 (a) 88 (a) 89 (a) 90 (b)
91 (b) 92 (c) 93 (a) 94 (a) 95 (d)
96 (b) 97 (a) 98 (d) 99 (c) 100 (a)

ANSWERS
101 (b) 102 (d) 103 (d) 104 (d) 105 (c)
106 (a) 107 (c) 108 (a) 109 (d) 110 (d)
111 (c) 112 (a) 113 (d) 114 (b) 115 (c)
116 (b) 117 (a) 118 (a) 119 (c) 120 (b)
121 (c) 122 (d) 123 (a) 124 (c) 125 (b)
126 (b) 127 (a) 128 (d) 129 (c) 130 (b)
131 (b) 132 (a) 133 (b) 134 (c) 135 (d)
136 (a) 137 (b) 138 (c) 139 (c) 140 (b)
141 (c) 142 (b) 143 (b) 144 (c) 145 (a)
146 (d) 147 (c) 148 (b) 149 (a) 150 (d)
151 (c) 152 (b) 153 (d) 154 (d) 155 (c)
156 (b) 157 (b) 158 (c) 159 (c) 160 (a)
161 (c) 162 (a) 163 (a) 164 (b) 165 (b)
166 (c) 167 (c) 168 (a) 169 (d) 170 (a)
171 (b) 172 (d) 173 (c) 174 (a) 175 (a)
176 (c) 177 (b) 178 (c) 179 (a) 180 (b)
181 (a) 182 (a) 183 (a) 184 (a) 185 (d)
186 (b) 187 (b) 188 (d) 189 (b) 190 (d)
191 (c) 192 (c) 193 (c) 194 (b) 195 (b)
196 (b) 197 (b) 198 (a) 199 (b) 200 (c)

1 (d) 2 (d) 3 (c) 4 (c) 5 (c)
6 (b) 7 (c) 8 (c) 9 (b) 10 (b)
11 (d) 12 (a) 13 (d) 14 (d) 15 (c)
16 (c) 17 (c) 18 (b) 19 (c) 20 (d)
21 (c) 22 (d) 23 (b) 24 (c) 25 (b)
26 (c) 27 (c) 28 (c) 29 (a) 30 (d)
31 (a) 32 (c) 33 (b) 34 (c) 35 (c)
36 (d) 37 (d) 38 (c) 39 (b) 40 (a)
41 (d) 42 (c) 43 (c) 44 (a) 45 (b)
46 (c) 47 (a) 48 (c) 49 (c) 50 (d)
51 (b) 52 (a) 53 (b) 54 (d) 55 (d)
56 (a) 57 (c) 58 (d) 59 (d) 60 (b)
61 (a) 62 (d) 63 (b) 64 (a) 65 (b)

66 (c) 67 (d) 68 (a) 69 (c) 70 (a)
71 (c) 72 (d) 73 (d) 74 (d) 75 (d)
76 (d) 77 (b) 78 (d) 79 (b) 80 (a)
81 (c) 82 (d) 83 (d) 84 (a) 85 (b)
86 (b) 87 (c) 88 (a) 89 (b) 90 (c)
91 (b) 92 (b) 93 (b) 94 (b) 95 (d)
96 (d) 97 (c) 98 (d) 99 (c) 100 (d)

ANSWERS
101 (a) 102 (b) 103 (d) 104 (a) 105 (c)
106 (c) 107 (c) 108 (d) 109 (a) 110 (c)
111 (a) 112 (c) 113 (a) 114 (d) 115 (b)
116 (c) 117 (a) 118 (b) 119 (c) 120 (c)
121 (d) 122 (b) 123 (a) 124 (d) 125 (d)
126 (c) 127 (c) 128 (c) 129 (b) 130 (a)
131 (b) 132 (b) 133 (a) 134 (c) 135 (d)
136 (b) 137 (b) 138 (a) 139 (d) 140 (d)
141 (c) 142 (b) 143 (c) 144 (b) 145 (a)
146 (c) 147 (d) 148 (a) 149 (c) 150 (b)
151 (b) 152 (b) 153 (c) 154 (d) 155 (c)
156 (b) 157 (d) 158 (c) 159 (a) 160 (c)
161 (c) 162 (b) 163 (c) 164 (c) 165 (b)
166 (c) 167 (d) 168 (c) 169 (a) 170 (a)
171 (c) 172 (c) 173 (a) 174 (d) 175 (a)
176 (a) 177 (b) 178 (c) 179 (c) 180 (d)
181 (b) 182 (d) 183 (b) 184 (c) 185 (c)
186 (c) 187 (c) 188 (b) 189 (b) 190 (a)
191 (c) 192 (c) 193 (a) 194 (d) 195 (b)
196 (a) 197 (c) 198 (c) 199 (a) 200 (a)

1 (c) 2 (b) 3 (b) 4 (c) 5 (a)

6 (c) 7 (c) 8 (d) 9 (c) 10 (b)
11 (c) 12 (b) 13 (a) 14 (b) 15 (d)
16 (c) 17 (c) 18 (b) 19 (c) 20 (b)
21 (d) 22 (d) 23 (a) 24 (b) 25 (c)
26 (a) 27 (c) 28 (d) 29 (c) 30 (a)
31 (d) 32 (c) 33 (a) 34 (b) 35 (a)
36 (b) 37 (b) 38 (b) 39 (d) 40 (a)
41 (b) 42 (b) 43 (c) 44 (c) 45 (a)
46 (a) 47 (d) 48 (c) 49 (a) 50 (b)
51 (c) 52 (d) 53 (b) 54 (a) 55 (c)
56 (b) 57 (d) 58 (c) 59 (b) 60 (d)
61 (c) 62 (c) 63 (d) 64 (c) 65 (d)

66 (d) 67 (a) 68 (b) 69 (c) 70 (a)
71 (a) 72 (c) 73 (c) 74 (b) 75 (d)
76 (d) 77 (d) 78 (a) 79 (d) 80 (a)
81 (d) 82 (a) 83 (c) 84 (b) 85 (b)
86 (d) 87 (c) 88 (b) 89 (a) 90 (c)
91 (b) 92 (c) 93 (a) 94 (b) 95 (a)
96 (c) 97 (a) 98 (c) 99 (b) 100 (b)

ANSWERS
101 (c) 102 (d) 103 (c) 104 (a) 105 (b)
106 (b) 107 (d) 108 (b) 109 (c) 110 (c)
111 (b) 112 (c) 113 (a) 114 (a) 115 (d)
116 (b) 117 (d) 118 (d) 119 (a) 120 (c)
121 (b) 122 (a) 123 (c) 124 (a) 125 (a)
126 (c) 127 (d) 128 (b) 129 (d) 130 (b)
131 (a) 132 (c) 133 (c) 134 (d) 135 (b)
136 (c) 137 (b) 138 (c) 139 (a) 140 (b)
141 (d) 142 (a) 143 (b) 144 (d) 145 (d)
146 (a) 147 (b) 148 (c) 149 (c) 150 (a)
151 (c) 152 (a) 153 (b) 154 (b) 155 (b)
156 (b) 157 (b) 158 (a) 159 (b) 160 (d)
161 (a) 162 (b) 163 (a) 164 (b) 165 (b)
166 (c) 167 (b) 168 (b) 169 (a) 170 (b)
171 (b) 172 (b) 173 (b) 174 (c) 175 (b)
176 (c) 177 (b) 178 (b) 179 (a) 180 (a)
181 (a) 182 (d) 183 (c) 184 (a) 185 (c)
186 (a) 187 (c) 188 (a) 189 (b) 190 (a)
191 (d) 192 (a) 193 (c) 194 (a) 195 (d)
196 (a) 197 (b) 198 (a) 199 (d) 200 (c)

1 (a) 2 (b) 3 (b) 4 (c) 5 (b)

6 (c) 7 (b) 8 (a) 9 (b) 10 (c)
11 (b) 12 (d) 13 (c) 14 (a) 15 (b)
16 (d) 17 (a) 18 (a) 19 (d) 20 (b)
21 (b) 22 (c) 23 (b) 24 (b) 25 (a)
26 (c) 27 (a) 28 (c) 29 (a) 30 (a)
31 (b) 32 (d) 33 (b) 34 (b) 35 (c)
36 (a) 37 (c) 38 (b) 39 (d) 40 (a)
41 (a) 42 (d) 43 (c) 44 (b) 45 (b)
46 (b) 47 (b) 48 (b) 49 (c) 50 (c)
51 (c) 52 (b) 53 (b) 54 (c) 55 (a)
56 (c) 57 (a) 58 (c) 59 (b) 60 (a)
61 (d) 62 (d) 63 (d) 64 (d) 65 (c)

66 (d) 67 (d) 68 (c) 69 (d) 70 (c)
71 (c) 72 (a) 73 (a) 74 (d) 75 (d)
76 (c) 77 (d) 78 (d) 79 (a) 80 (b)
81 (b) 82 (a) 83 (a) 84 (c) 85 (b)
86 (c) 87 (a) 88 (a) 89 (c) 90 (b)
91 (b) 92 (d) 93 (c) 94 (b) 95 (a)
96 (c) 97 (b) 98 (c) 99 (d) 100 (c)

ANSWERS
101 (c) 102 (d) 103 (c) 104 (c) 105 (d)
106 (d) 107 (b) 108 (b) 109 (a) 110 (c)
111 (a) 112 (a) 113 (b) 114 (b) 115 (b)
116 (d) 117 (d) 118 (c) 119 (a) 120 (a)
121 (b) 122 (b) 123 (c) 124 (d) 125 (d)
126 (a) 127 (b) 128 (b) 129 (a) 130 (b)
131 (a) 132 (d) 133 (b) 134 (c) 135 (d)
136 (a) 137 (b) 138 (d) 139 (b) 140 (c)
141 (c) 142 (d) 143 (b) 144 (c) 145 (a)
146 (c) 147 (a) 148 (a) 149 (c) 150 (b)
151 (a) 152 (a) 153 (a) 154 (a) 155 (a)
156 (b) 157 (c) 158 (d) 159 (b) 160 (a)
161 (c) 162 (a) 163 (a) 164 (a) 165 (b)
166 (a) 167 (b) 168 (a) 169 (b) 170 (a)
171 (c) 172 (b) 173 (b) 174 (b) 175 (b)
176 (b) 177 (a) 178 (a) 179 (c) 180 (c)
181 (d) 182 (a) 183 (b) 184 (a) 185 (b)
186 (a) 187 (c) 188 (c) 189 (b) 190 (a)
191 (a) 192 (b) 193 (d) 194 (b) 195 (b)
196 (b) 197 (c) 198 (c) 199 (c) 200 (a)

1 (c) 2 (a) 3 (d) 4 (a) 5 (a)

6 (a) 7 (c) 8 (b) 9 (c) 10 (c)
11 (b) 12 (a) 13 (c) 14 (d) 15 (b)
16 (a) 17 (d) 18 (b) 19 (b) 20 (c)
21 (b) 22 (d) 23 (a) 24 (b) 25 (a)
26 (a) 27 (a) 28 (d) 29 (c) 30 (d)
31 (b) 32 (d) 33 (a) 34 (d) 35 (a)
36 (c) 37 (d) 38 (a) 39 (a) 40 (a)
41 (b) 42 (b) 43 (b) 44 (a) 45 (a)
46 (a) 47 (a) 48 (a) 49 (b) 50 (b)
51 (a) 52 (b) 53 (a) 54 (a) 55 (b)
56 (a) 57 (d) 58 (a) 59 (a) 60 (b)
SECTION-B : MERCANTILE LAWS
61 (b) 62 (d) 63 (a) 64 (b) 65 (d)

66 (a) 67 (d) 68 (a) 69 (d) 70 (d)
71 (a) 72 (d) 73 (c) 74 (c) 75 (c)
76 (d) 77 (a) 78 (d) 79 (c) 80 (b)
81 (d) 82 (c) 83 (c) 84 (c) 85 (c)
86 (a) 87 (a) 88 (b) 89 (c) 90 (d)
91 (b) 92 (d) 93 (b) 94 (c) 95 (b)
96 (b) 97 (d) 98 (c) 99 (a) 10 0 (d)

ANSWERS
SECTION–C : GENERAL ECONOMICS
10 1 (a) 10 2 (c) 10 3 (a) 10 4 (c) 10 5 (c)

10 6 (d) 10 7 (b) 10 8 (a) 10 9 (d) 11 0 (b)
111 (d) 11 2 (d) 11 3 (b) 11 4 (d) 11 5 (b)
11 6 (c) 11 7 (d) 11 8 (a) 11 9 (b) 12 0 (b)
12 1 (a) 12 2 (d) 12 3 (c) 12 4 (c) 12 5 (c)
12 6 (b) 12 7 (c) 12 8 (c) 12 9 (c) 13 0 (c)
13 1 (a) 13 2 (b) 13 3 (b) 13 4 (c) 13 5 (d)
13 6 (c) 13 7 (b) 13 8 (a) 13 9 (a) 14 0 (c)
14 1 (c) 14 2 (d) 14 3 (d) 14 4 (a) 14 5 (d)
14 6 (d) 14 7 (a) 14 8 (d) 14 9 (d) 15 0 (c)
SECTION–D : QUANTITATIVE APTITUDE
15 1 (b) 15 2 (d) 15 3 (c) 15 4 (d) 15 5 (d)

15 6 (d) 15 7 (b) 15 8 (a) 15 9 (b) 16 0 (b)
16 1 (d) 16 2 (a) 16 3 (b) 16 4 (b) 16 5 (b)
16 6 (d) 16 7 (a) 16 8 (b) 16 9 (a) 17 0 (b)
17 1 (c) 17 2 (a) 17 3 (a) 17 4 (b) 17 5 (a)
17 6 (b) 17 7 (b) 17 8 (d) 17 9 (a) 18 0 (b)
18 1 (c) 18 2 (a) 18 3 (a) 18 4 (d) 18 5 (b)
18 6 (b) 18 7 (b) 18 8 (a) 18 9 (c) 19 0 (b)
19 1 (a) 19 2 (a) 19 3 (b) 19 4 (c) 19 5 (a)
19 6 (b) 19 7 (c) 19 8 (d) 19 9 (a) 20 0 (c)

1 (d) 2 (a) 3 (c) 4 (c) 5 (a)

6 (a) 7 (d) 8 (b) 9 (b) 10 (b)
11 (d) 12 (c) 13 (b) 14 (a) 15 (b)
16 (c) 17 (c) 18 (a) 19 (a) 20 (c)
21 (a) 22 (c) 23 (b) 24 (a) 25 (a)
26 (a) 27 (b) 28 (a) 29 (a) 30 (d)
31 (a) 32 (b) 33 (c) 34 (b) 35 (b)
36 (a) 37 (b) 38 (b) 39 (b) 40 (b)
41 (b) 42 (b) 43 (b) 44 (b) 45 (c)
46 (a) 47 (a) 48 (a) 49 (a) 50 (c)
51 (a) 52 (a) 53 (a) 54 (a) 55 (a)
56 (c) 57 (a) 58 (a) 59 (a) 60 (b)
SECTION–B : MERCANTILE LAWS
61 (d) 62 (d) 63 (d) 64 (c) 65 (b)

66 (b) 67 (a) 68 (a) 69 (d) 70 (b)
71 (d) 72 (d) 73 (d) 74 (d) 75 (c)
76 (a) 77 (c) 78 (a) 79 (a) 80 (d)
81 (a) 82 (a) 83 (c) 84 (c) 85 (d)
86 (a) 87 (c) 88 (a) 89 (c) 90 (b)
91 (b) 92 (a) 93 (b) 94 (c) 95 (d)
96 (a) 97 (b) 98 (a) 99 (a) 10 0 (b)

ANSWERS
10 1 (c) 10 2 (b) 10 3 (a) 10 4 (a) 10 5 (a)

10 6 (b) 10 7 (b) 10 8 (d) 10 9 (c) 11 0 (a)
111 (b) 11 2 (c) 11 3 (c) 11 4 (d) 11 5 (b)
11 6 (a) 11 7 (c) 11 8 (b) 11 9 (d) 12 0 (b)
12 1 (a) 12 2 (b) 12 3 (c) 12 4 (d) 12 5 (c)
12 6 (a) 12 7 (a) 12 8 (d) 12 9 (b) 13 0 (a)
13 1 (c) 13 2 (d) 13 3 (a) 13 4 (a) 13 5 (d)
13 6 (d) 13 7 (b) 13 8 (d) 13 9 (a) 14 0 (b)
14 1 (d) 14 2 (b) 14 3 (a) 14 4 (b) 14 5 (c)
14 6 (c) 14 7 (c) 14 8 (b) 14 9 (d) 15 0 (b)
15 1 (a) 15 2 (d) 15 3 (a) 15 4 (a) 15 5 (c)

15 6 (a) 15 7 (a) 15 8 (a) 15 9 (a) 16 0 (c)
16 1 (b) 16 2 (a) 16 3 (b) 16 4 (a) 16 5 (b)
16 6 (c) 16 7 (a) 16 8 (b) 16 9 (c) 17 0 (d)
17 1 (b) 17 2 (a) 17 3 (c) 17 4 (a) 17 5 (b)
17 6 (b) 17 7 (b) 17 8 (d) 17 9 (c) 18 0 (b)
18 1 (b) 18 2 (a) 18 3 (b) 18 4 (a) 18 5 (a)
18 6 (b) 18 7 (b) 18 8 (a) 18 9 (c) 19 0 (c)
19 1 (c) 19 2 (a) 19 3 (a) 19 4 (c) 19 5 (c)
19 6 (b) 19 7 (a) 19 8 (a) 19 9 (c) 20 0 (b)

1 (c) 2 (b) 3 (c) 4 (d) 5 (a)

6 (c) 7 (c) 8 (d) 9 (a) 10 (b)
11 (b) 12 (c) 13 (b) 14 (b) 15 (b)
16 (d) 17 (a) 18 (a) 19 (a) 20 (c)
21 (c) 22 (d) 23 (b) 24 (b) 25 (a)
26 (c) 27 (a) 28 (b) 29 (d) 30 (a)
31 (b) 32 (a) 33 (a) 34 (d) 35 (a)
36 (a) 37 (a) 38 (a) 39 (b) 40 (a)
41 (a) 42 (b) 43 (a) 44 (a) 45 (b)
46 (b) 47 (b) 48 (c) 49 (a) 50 (b)
51 (b) 52 (a) 53 (a) 54 (a) 55 (a)
56 (b) 57 (d) 58 (b) 59 (c) 60 (b)
61 (d) 62 (c) 63 (c) 64 (c) 65 (d)

66 (d) 67 (b) 68 (d) 69 (b) 70 (b)
71 (a) 72 (b) 73 (d) 74 (b) 75 (c)
76 (b) 77 (d) 78 (d) 79 (d) 80 (b)
81 (a) 82 (c) 83 (b) 84 (b) 85 (b)
86 (a) 87 (d) 88 (b) 89 (a) 90 (c)
91 (b) 92 (d) 93 (b) 94 (c) 95 (d)
96 (d) 97 (a) 98 (c) 99 (d) 10 0 (a)

ANSWERS
10 1 (d) 10 2 (c) 10 3 (c) 10 4 (b) 10 5 (d)

10 6 (b) 10 7 (b) 10 8 (a) 10 9 (a) 11 0 (a)
111 (c) 11 2 (b) 11 3 (b) 11 4 (d) 11 5 (c)
11 6 (b) 11 7 (a) 11 8 (d) 11 9 (c) 12 0 (c)
12 1 (a) 12 2 (b) 12 3 (c) 12 4 (b) 12 5 (a)
12 6 (c) 12 7 (c) 12 8 (c) 12 9 (d) 13 0 (d)
13 1 (c) 13 2 (d) 13 3 (b) 13 4 (b) 13 5 (c)
13 6 (c) 13 7 (d) 13 8 (b) 13 9 (c) 14 0 (a)
14 1 (d) 14 2 (d) 14 3 (d) 14 4 (d) 14 5 (a)
14 6 (a) 14 7 (c) 14 8 (a) 14 9 (b) 15 0 (d)
15 1 (d) 15 2 (a) 15 3 (a) 15 4 (b) 15 5 (b)

15 6 (d) 15 7 (a) 15 8 (c) 15 9 (a) 16 0 (a)
16 1 (b) 16 2 (a) 16 3 (c) 16 4 (d) 16 5 (c)
16 6 (b) 16 7 (a) 16 8 (b) 16 9 (c) 17 0 (c)
17 1 (a) 17 2 (d) 17 3 (a) 17 4 (b) 17 5 (a)
17 6 (b) 17 7 (a) 17 8 (c) 17 9 (c) 18 0 (b)
18 1 (a) 18 2 (c) 18 3 (b) 18 4 (d) 18 5 (a)
18 6 (b) 18 7 (a) 18 8 (a) 18 9 (b) 19 0 (b)
19 1 (d) 19 2 (b) 19 3 (a) 19 4 (c) 19 5 (c)
19 6 (c) 19 7 (a) 19 8 (b) 19 9 (c) 20 0 (c)

1 (a) 2 (a) 3 (c) 4 (c) 5 (c)

6 (b) 7 (a) 8 (d) 9 (a) 10 (a)
11 (b) 12 (c) 13 (c) 14 (b) 15 (d)
16 (a) 17 (b) 18 (d) 19 (d) 20 (c)
21 (a) 22 (c) 23 (a) 24 (b) 25 (b)
26 (a) 27 (b) 28 (b) 29 (a) 30 (a)
31 (b) 32 (c) 33 (b) 34 (c) 35 (d)
36 (a) 37 (a) 38 (a) 39 (a) 40 (a)
41 (c) 42 (b) 43 (a) 44 (b) 45 (a)
46 (d) 47 (a) 48 (a) 49 (a) 50 (a)
51 (a) 52 (a) 53 (b) 54 (a) 55 (a)
56 (a) 57 (a) 58 (a) 59 (a) 60 (c)
61 (d) 62 (d) 63 (d) 64 (b) 65 (b)

66 (c) 67 (d) 68 (a) 69 (d) 70 (d)
71 (d) 72 (d) 73 (d) 74 (d) 75 (d)
76 (d) 77 (c) 78 (b) 79 (d) 80 (a)
81 (a) 82 (b) 83 (a) 84 (a) 85 (b)
86 (b) 87 (b) 88 (c) 89 (b) 90 (b)
91 (d) 92 (a) 93 (d) 94 (a) 95 (d)
96 (a) 97 (c) 98 (d) 99 (c) 10 0 (c)

ANSWERS
10 1 (c) 10 2 (a) 10 3 (b) 10 4 (d) 10 5 (b)

10 6 (b) 10 7 (b) 10 8 (b) 10 9 (b) 11 0 (a)
111 (b) 11 2 (a) 11 3 (a) 11 4 (d) 11 5 (d)
11 6 (b) 11 7 (d) 11 8 (a) 11 9 (b) 12 0 (a)
12 1 (b) 12 2 (c) 12 3 (a) 12 4 (a) 12 5 (c)
12 6 (c) 12 7 (b) 12 8 (b) 12 9 (d) 13 0 (d)
13 1 (c) 13 2 (c) 13 3 (b) 13 4 (b) 13 5 (d)
13 6 (a) 13 7 (a) 13 8 (b) 13 9 (b) 14 0 (d)
14 1 (d) 14 2 (c) 14 3 (c) 14 4 (c) 14 5 (d)
14 6 (c) 14 7 (b) 14 8 (d) 14 9 (d) 15 0 (d)
15 1 (a) 15 2 (c) 15 3 (a) 15 4 (b) 15 5 (a)

15 6 (d) 15 7 (a) 15 8 (b) 15 9 (c) 16 0 (b)
16 1 (a) 16 2 (b) 16 3 (c) 16 4 (d) 16 5 (a)
16 6 (a) 16 7 (c) 16 8 (a) 16 9 (c) 17 0 (d)
17 1 (b) 17 2 (a) 17 3 (a) 17 4 (c) 17 5 (c)
17 6 (d) 17 7 (a) 17 8 (b) 17 9 (a) 18 0 (c)
18 1 (b) 18 2 (a) 18 3 (b) 18 4 (a) 18 5 (a)
18 6 (c) 18 7 (a) 18 8 (d) 18 9 (b) 19 0 (a)
19 1 (b) 19 2 (a) 19 3 (b) 19 4 (a) 19 5 (c)
19 6 (c) 19 7 (a) 19 8 (b) 19 9 (a) 20 0 (b)

1 (b) 2 (b) 3 (b) 4 (d) 5 (d)

6 (a) 7 (a) 8 (c) 9 (d) 10 (a)
11 (c) 12 (b) 13 (a) 14 (c) 15 (c)
16 (a) 17 (b) 18 (c) 19 (c) 20 (c)
21 (d) 22 (b) 23 (c) 24 (a) 25 (b)
26 (a) 27 (b) 28 (a) 29 (b) 30 (a)
31 (a) 32 (a) 33 (c) 34 (a) 35 (d)
36 (b) 37 (a) 38 (b) 39 (d) 40 (a)
41 (a) 42 (a) 43 (a) 44 (b) 45 (c)
46 (d) 47 (a) 48 (a) 49 (a) 50 (b)
51 (a) 52 (a) 53 (a) 54 (c) 55 (b)
56 (c) 57 (a) 58 (a) 59 (c) 60 (a)
61 (c) 62 (d) 63 (b) 64 (d) 65 (b)

66 (c) 67 (d) 68 (c) 69 (c) 70 (a)
71 (d) 72 (d) 73 (b) 74 (a) 75 (d)
76 (a) 77 (a) 78 (a) 79 (d) 80 (a)
81 (d) 82 (b) 83 (a) 84 (a) 85 (a)
86 (a) 87 (b) 88 (b) 89 (d) 90 (a)
91 (a) 92 (a) 93 (b) 94 (d) 95 (a)
96 (a) 97 (a) 98 (a) 99 (d) 10 0 (a)

ANSWERS
10 1 (c) 10 2 (b) 10 3 (c) 10 4 (d) 10 5 (d)

10 6 (c) 10 7 (c) 10 8 (d) 10 9 (c) 11 0 (d)
111 (b) 11 2 (c) 11 3 (c) 11 4 (d) 11 5 (a)
11 6 (d) 11 7 (d) 11 8 (c) 11 9 (c) 12 0 (a)
12 1 (c) 12 2 (d) 12 3 (b) 12 4 (c) 12 5 (d)
12 6 (d) 12 7 (a) 12 8 (c) 12 9 (d) 13 0 (b)
13 1 (b) 13 2 (a) 13 3 (b) 13 4 (a) 13 5 (c)
13 6 (a) 13 7 (a) 13 8 (c) 13 9 (b) 14 0 (c)
14 1 (b) 14 2 (a) 14 3 (d) 14 4 (b) 14 5 (c)
14 6 (b) 14 7 (c) 14 8 (b) 14 9 (b) 15 0 (a)
15 1 (a) 15 2 (b) 15 3 (c) 15 4 (a) 15 5 (a)

15 6 (b) 15 7 (b) 15 8 (d) 15 9 (b) 16 0 (a)
16 1 (c) 16 2 (b) 16 3 (a) 16 4 (c) 16 5 (d)
16 6 (a) 16 7 (c) 16 8 (d) 16 9 (b) 17 0 (a)
17 1 (c) 17 2 (a) 17 3 (a) 17 4 (a) 17 5 (c)
17 6 (a) 17 7 (b) 17 8 (b) 17 9 (a) 18 0 (c)
18 1 (a) 18 2 (a) 18 3 (b) 18 4 (c) 18 5 (a)
18 6 (d) 18 7 (a) 18 8 (d) 18 9 (c) 19 0 (a)
19 1 (b) 19 2 (a) 19 3 (c) 19 4 (b) 19 5 (c)
19 6 (a) 19 7 (b) 19 8 (a) 19 9 (d) 20 0 (d)

1 (b) 2 (d) 3 (c) 4 (b) 5 (c)

6 (b) 7 (c) 8 (a) 9 (b) 10 (a)
11 (a) 12 (d) 13 (a) 14 (a) 15 (c)
16 (b) 17 (c) 18 (d) 19 (c) 20 (b)
21 (a) 22 (b) 23 (c) 24 (a) 25 (b)
26 (b) 27 (c) 28 (a) 29 (b) 30 (a)
31 (b) 32 (a) 33 (b) 34 (a) 35 (a)
36 (a) 37 (b) 38 (a) 39 (b) 40 (a)
41 (a) 42 (b) 43 (a) 44 (a) 45 (d)
46 (a) 47 (a) 48 (a) 49 (b) 50 (a)
51 (a) 52 (a) 53 (a) 54 (a) 55 (b)
56 (b) 57 (b) 58 (d) 59 (c) 60 (c)
61 (c) 62 (d) 63 (b) 64 (c) 65 (a)

66 (d) 67 (d) 68 (a) 69 (b) 70 (c)
71 (a) 72 (a) 73 (d) 74 (a) 75 (b)
76 (d) 77 (b) 78 (d) 79 (a) 80 (b)
81 (a) 82 (a) 83 (a) 84 (d) 85 (a)
86 (a) 87 (b) 88 (b) 89 (b) 90 (d)
91 (a) 92 (d) 93 (d) 94 (d) 95 (a)
96 (c) 97 (d) 98 (a) 99 (a) 10 0 (d)

ANSWERS
10 1 (c) 10 2 (c) 10 3 (a) 10 4 (c) 10 5 (c)

10 6 (c) 10 7 (c) 10 8 (d) 10 9 (b) 11 0 (c)
111 (d) 11 2 (d) 11 3 (c) 11 4 (a) 11 5 (c)
11 6 (d) 11 7 (d) 11 8 (b) 11 9 (c) 12 0 (c)
12 1 (b) 12 2 (d) 12 3 (c) 12 4 (d) 12 5 (c)
12 6 (c) 12 7 (b) 12 8 (b) 12 9 (b) 13 0 (c)
13 1 (d) 13 2 (d) 13 3 (d) 13 4 (d) 13 5 (b)
13 6 (b) 13 7 (d) 13 8 (c) 13 9 (b) 14 0 (a)
14 1 (d) 14 2 (d) 14 3 (b) 14 4 (d) 14 5 (d)
14 6 (b) 14 7 (c) 14 8 (d) 14 9 (b) 15 0 (d)
15 1 (a) 15 2 (b) 15 3 (c) 15 4 (c) 15 5 (a)

15 6 (b) 15 7 (b) 15 8 (a) 15 9 (a) 16 0 (d)
16 1 (a) 16 2 (b) 16 3 (b) 16 4 (c) 16 5 (a)
16 6 (d) 16 7 (b) 16 8 (a) 16 9 (b) 17 0 (c)
17 1 (c) 17 2 (a) 17 3 (b) 17 4 (b) 17 5 (c)
17 6 (a) 17 7 (c) 17 8 (d) 17 9 (a) 18 0 (b)
18 1 (d) 18 2 (b) 18 3 (b) 18 4 (a) 18 5 (c)
18 6 (a) 18 7 (b) 18 8 (d) 18 9 (a) 19 0 (b)
19 1 (b) 19 2 (c) 19 3 (a) 19 4 (a) 19 5 (c)
19 6 (d) 19 7 (a) 19 8 (b) 19 9 (a) 20 0 (c)

1 (d) 2 (a) 3 (a) 4 (a) 5 (c)

6 (a) 7 (a) 8 (b) 9 (c) 10 (d)
11 (a) 12 (c) 13 (b) 14 (a) 15 (c)
16 (a) 17 (b) 18 (c) 19 (d) 20 (c)
21 (c) 22 (c) 23 (a) 24 (b) 25 (c)
26 (a) 27 (c) 28 (a) 29 (c) 30 (b)
31 (b) 32 (d) 33 (a) 34 (b) 35 (a)
36 (d) 37 (a) 38 (a) 39 (a) 40 (b)
41 (a) 42 (c) 43 (a) 44 (b) 45 (d)
46 (b) 47 (b) 48 (a) 49 (c) 50 (b)
51 (a) 52 (c) 53 (a) 54 (b) 55 (b)
56 (a) 57 (a) 58 (a) 59 (a) 60 (a)
61 (a) 62 (b) 63 (d) 64 (d) 65 (d)

66 (d) 67 (c) 68 (a) 69 (a) 70 (a)
71 (d) 72 (a) 73 (b) 74 (d) 75 (a)
76 (a) 77 (d) 78 (a) 79 (b) 80 (c)
81 (b) 82 (d) 83 (c) 84 (a) 85 (a)
86 (c) 87 (b) 88 (b) 89 (a) 90 (a)
91 (a) 92 (a) 93 (a) 94 (d) 95 (c)
96 (a) 97 (a) 98 (a) 99 (a) 10 0 (a)

ANSWERS
10 1 (d) 10 2 (a) 10 3 (c) 10 4 (a) 10 5 (a)

10 6 (c) 10 7 (a) 10 8 (c) 10 9 (c) 11 0 (b)
111 (c) 11 2 (d) 11 3 (b) 11 4 (c) 11 5 (a)
11 6 (a) 11 7 (b) 11 8 (b) 11 9 (b) 12 0 (d)
12 1 (d) 12 2 (b) 12 3 (a) 12 4 (b) 12 5 (a)
12 6 (a) 12 7 (a) 12 8 (c) 12 9 (b) 13 0 (c)
13 1 (c) 13 2 (c) 13 3 (d) 13 4 (a) 13 5 (b)
13 6 (d) 13 7 (c) 13 8 (b) 13 9 (c) 14 0 (b)
14 1 (d) 14 2 (b) 14 3 (b) 14 4 (b) 14 5 (c)
14 6 (d) 14 7 (c) 14 8 (c) 14 9 (b) 15 0 (b)
15 1 (d) 15 2 (a) 15 3 (a) 15 4 (c) 15 5 (b)

15 6 (a) 15 7 (c) 15 8 (a) 15 9 (b) 16 0 (a)
16 1 (c) 16 2 (a) 16 3 (d) 16 4 (b) 16 5 (a)
16 6 (c) 16 7 (a) 16 8 (c) 16 9 (b) 17 0 (a)
17 1 (c) 17 2 (a) 17 3 (b) 17 4 (a) 17 5 (c)
17 6 (c) 17 7 (a) 17 8 (d) 17 9 (a) 18 0 (b)
18 1 (a) 18 2 (a) 18 3 (b) 18 4 (a) 18 5 (c)
18 6 (a) 18 7 (c) 18 8 (a) 18 9 (b) 19 0 (d)
19 1 (b) 19 2 (a) 19 3 (d) 19 4 (b) 19 5 (a)
19 6 (c) 19 7 (b) 19 8 (d) 19 9 (a) 20 0 (b)

1 (b) 2 (c) 3 (c) 4 (c) 5 (c)

6 (d) 7 (b) 8 (c) 9 (b) 10 (d)
11 (a) 12 (a) 13 (a) 14 (a) 15 (c)
16 (a) 17 (b) 18 (c) 19 (d) 20 (d)
21 (c) 22 (b) 23 (a) 24 (a) 25 (a)
26 (b) 27 (d) 28 (b) 29 (d) 30 (d)
31 (a) 32 (a) 33 (d) 34 (d) 35 (a)
36 (a) 37 (b) 38 (b) 39 (b) 40 (c)
41 (d) 42 (a) 43 (a) 44 (a) 45 (b)
46 (a) 47 (c) 48 (d) 49 (a) 50 (b)
51 (c) 52 (b) 53 (b) 54 (b) 55 (a)
56 (b) 57 (a) 58 (c) 59 (a) 60 (a)
61 (a) 62 (b) 63 (a) 64 (c) 65 (a)

66 (b) 67 (a) 68 (c) 69 (b) 70 (d)
71 (d) 72 (a) 73 (a) 74 (d) 75 (a)
76 (a) 77 (d) 78 (d) 79 (c) 80 (b)
81 (b) 82 (a) 83 (a) 84 (a) 85 (d)
86 (a) 87 (b) 88 (d) 89 (a) 90 (a)
91 (a) 92 (d) 93 (a) 94 (a) 95 (b)
96 (c) 97 (d) 98 (d) 99 (b) 10 0 (c)

ANSWERS
10 1 (c) 10 2 (d) 10 3 (b) 10 4 (c) 10 5 (b)

10 6 (b) 10 7 (b) 10 8 (a) 10 9 (b) 11 0 (a)
111 (c) 11 2 (d) 11 3 (b) 11 4 (b) 11 5 (a)
11 6 (c) 11 7 (a) 11 8 (d) 11 9 (a) 12 0 (a)
12 1 (b) 12 2 (c) 12 3 (b) 12 4 (b) 12 5 (c)
12 6 (a) 12 7 (a) 12 8 (b) 12 9 (a) 13 0 (c)
13 1 (b) 13 2 (a) 13 3 (c) 13 4 (b) 13 5 (a)
13 6 (a) 13 7 (c) 13 8 (c) 13 9 (b) 14 0 (d)
14 1 (b) 14 2 (b) 14 3 (d) 14 4 (b) 14 5 (a)
14 6 (a) 14 7 (a) 14 8 (d) 14 9 (b) 15 0 (c)
15 1 (a) 15 2 (c) 15 3 (c) 15 4 (a) 15 5 (b)

15 6 (c) 15 7 (b) 15 8 (a) 15 9 (b) 16 0 (b)
16 1 (a) 16 2 (b) 16 3 (c) 16 4 (a) 16 5 (c)
16 6 (a) 16 7 (b) 16 8 (c) 16 9 (b) 17 0 (b)
17 1 (a) 17 2 (c) 17 3 (a) 17 4 (b) 17 5 (a)
17 6 (a) 17 7 (b) 17 8 (c) 17 9 (b) 18 0 (a)
18 1 (b) 18 2 (a) 18 3 (b) 18 4 (c) 18 5 (a)
18 6 (b) 18 7 (c) 18 8 (a) 18 9 (b) 19 0 (a)
19 1 (b) 19 2 (b) 19 3 (a) 19 4 (a) 19 5 (b)
19 6 (c) 19 7 (b) 19 8 (c) 19 9 (a) 20 0 (b)

1 (a) 2 (a) 3 (a) 4 (c) 5 (a)

6 (b) 7 (a) 8 (c) 9 (a) 10 (a)
11 (b) 12 (b) 13 (d) 14 (a) 15 (b)
16 (c) 17 (b) 18 (b) 19 (c) 20 (a)
21 (b) 22 (b) 23 (d) 24 (a) 25 (c)
26 (a) 27 (b) 28 (a) 29 (a) 30 (a)
31 (a) 32 (a) 33 (a) 34 (a) 35 (a)
36 (a) 37 (b) 38 (a) 39 (a) 40 (b)
41 (a) 42 (b) 43 (a) 44 (a) 45 (d)
46 (a) 47 (a) 48 (a) 49 (a) 50 (d)
51 (a) 52 (a) 53 (a) 54 (a) 55 (d)
56 (b) 57 (a) 58 (a) 59 (d) 60 (a)
61 (b) 62 (a) 63 (a) 64 (b) 65 (d)

66 (c) 67 (d) 68 (a) 69 (c) 70 (c)
71 (a) 72 (c) 73 (c) 74 (a) 75 (a)
76 (d) 77 (a) 78 (d) 79 (a) 80 (b)
81 (a) 82 (c) 83 (c) 84 (a) 85 (b)
86 (b) 87 (a) 88 (a) 89 (a) 90 (b)
91 (a) 92 (d) 93 (a) 94 (b) 95 (c)
96 (a) 97 (c) 98 (c) 99 (b) 10 0 (b)

ANSWERS
10 1 (c) 10 2 (b) 10 3 (c) 10 4 (a) 10 5 (c)

10 6 (a) 10 7 (c) 10 8 (a) 10 9 (a) 11 0 (d)
111 (a) 11 2 (a) 11 3 (a) 11 4 (a) 11 5 (c)
11 6 (d) 11 7 (c) 11 8 (b) 11 9 (b) 12 0 (d)
12 1 (d) 12 2 (a) 12 3 (d) 12 4 (d) 12 5 (a)
12 6 (c) 12 7 (a) 12 8 (a) 12 9 (d) 13 0 (c)
13 1 (c) 13 2 (c) 13 3 (d) 13 4 (b) 13 5 (d)
13 6 (d) 13 7 (b) 13 8 (d) 13 9 (d) 14 0 (d)
14 1 (c) 14 2 (d) 14 3 (c) 14 4 (c) 14 5 (d)
14 6 (c) 14 7 (a) 14 8 (b) 14 9 (b) 15 0 (d)
15 1 (c) 15 2 (a) 15 3 (b) 15 4 (c) 15 5 (a)

15 6 (b) 15 7 (a) 15 8 (b) 15 9 (a) 16 0 (a)
16 1 (a) 16 2 (c) 16 3 (b) 16 4 (d) 16 5 (a)
16 6 (c) 16 7 (a) 16 8 (b) 16 9 (a) 17 0 (c)
17 1 (b) 17 2 (a) 17 3 (b) 17 4 (d) 17 5 (a)
17 6 (b) 17 7 (a) 17 8 (c) 17 9 (a) 18 0 (a)
18 1 (c) 18 2 (b) 18 3 (a) 18 4 (b) 18 5 (a)
18 6 (d) 18 7 (a) 18 8 (b) 18 9 (a) 19 0 (c)
19 1 (a) 19 2 (b) 19 3 (a) 19 4 (b) 19 5 (a)
19 6 (c) 19 7 (a) 19 8 (c) 19 9 (a) 20 0 (b)

1 (a) 2 (c) 3 (c) 4 (c) 5 (b)

6 (a) 7 (b) 8 (c) 9 (b) 10 (d)
11 (d) 12 (d) 13 (a) 14 (a) 15 (c)
16 (a) 17 (a) 18 (c) 19 (a) 20 (c)
21 (a) 22 (c) 23 (a) 24 (b) 25 (a)
26 (a) 27 (a) 28 (b) 29 (a) 30 (c)
31 (a) 32 (a) 33 (c) 34 (a) 35 (c)
36 (a) 37 (a) 38 (a) 39 (b) 40 (a)
41 (a) 42 (a) 43 (d) 44 (a) 45 (b)
46 (a) 47 (a) 48 (a) 49 (a) 50 (a)
51 (b) 52 (a) 53 (c) 54 (a) 55 (a)
56 (a) 57 (a) 58 (a) 59 (a) 60 (a)
61 (d) 62 (d) 63 (c) 64 (d) 65 (d)

66 (c) 67 (a) 68 (d) 69 (b) 70 (a)
71 (a) 72 (c) 73 (b) 74 (a) 75 (c)
76 (b) 77 (c) 78 (c) 79 (a) 80 (c)
81 (a) 82 (b) 83 (d) 84 (d) 85 (d)
86 (c) 87 (d) 88 (d) 89 (d) 90 (b)
91 (a) 92 (b) 93 (a) 94 (a) 95 (b)
96 (d) 97 (d) 98 (b) 99 (a) 10 0 (b)

ANSWERS
10 1 (d) 10 2 (d) 10 3 (a) 10 4 (d) 10 5 (b)

10 6 (d) 10 7 (c) 10 8 (c) 10 9 (a) 11 0 (b)
111 (d) 11 2 (b) 11 3 (a) 11 4 (d) 11 5 (d)
11 6 (d) 11 7 (c) 11 8 (a) 11 9 (c) 12 0 (b)
12 1 (a) 12 2 (c) 12 3 (c) 12 4 (d) 12 5 (c)
12 6 (b) 12 7 (d) 12 8 (a) 12 9 (c) 13 0 (d)
13 1 (c) 13 2 (a) 13 3 (b) 13 4 (a) 13 5 (a)
13 6 (c) 13 7 (c) 13 8 (a) 13 9 (c) 14 0 (b)
14 1 (d) 14 2 (b) 14 3 (d) 14 4 (b) 14 5 (d)
14 6 (a) 14 7 (c) 14 8 (a) 14 9 (a) 15 0 (b)
15 1 (b) 15 2 (c) 15 3 (c) 15 4 (a) 15 5 (a)

15 6 (c) 15 7 (c) 15 8 (a) 15 9 (b) 16 0 (d)
16 1 (c) 16 2 (c) 16 3 (c) 16 4 (d) 16 5 (b)
16 6 (a) 16 7 (b) 16 8 (c) 16 9 (a) 17 0 (b)
17 1 (a) 17 2 (a) 17 3 (c) 17 4 (a) 17 5 (b)
17 6 (a) 17 7 (c) 17 8 (b) 17 9 (b) 18 0 (a)
18 1 (b) 18 2 (a) 18 3 (b) 18 4 (c) 18 5 (a)
18 6 (b) 18 7 (a) 18 8 (d) 18 9 (a) 19 0 (c)
19 1 (a) 19 2 (b) 19 3 (c) 19 4 (a) 19 5 (c)
19 6 (a) 19 7 (c) 19 8 (a) 19 9 (c) 20 0 (b)

SECTION — A : FUNDAMENTALS OF ACCOUNTING
Suggested Answer/Hints
Model Test Paper — BOS/CPT – 1
1. Same method of depreciation is followed year after year due to consistency.

2. A change in accounting policy is justified due to all the three options given in the question.
3. Purchases book records all credit purchases of the goods in trade.
4. A bank reconciliation statement is prepared to know the causes for the difference between balances
as per bank column of the cash book and pass book.
5. Due to this error, previous year’s profit is overstated and current year’s profit is understated.
6. In the absence of provision in the partnership agreement, profit and losses are shared equally.
7. Going concern is fundamental accounting assumption.
8. Compensating errors are not revealed by trail balance.
9. Wages paid for installation of machinery is a capital item.
10. If del-credere commission is allowed bad debts will not be borne by consignor, thus not debited to
consignment etc.
11. Discount on issue of debenture is capital loss to be written off over tenure of debentures.
12. Loss on issue of debentures is treated as other current/non-current assets.
13. Dividends are usually paid as percentage of paid up capital.
14. Partners will get policy amount in the given case.
15. Profit/Loss on revaluation is shared among partners in old profit sharing ratio.
16. Interest on capital will be paid only from profit of the year in the given case.
17. Consigner is the owner of the consignment inventory.
18. Parties to joint venture are co-venturers.
19. Accommodation bill is dream when both parties are in need of funds.
20. Number of units expected to be produced from the use of asset is called as useful life.
21. Cost concept is being violated by A.
22. Change in method of depreciation should be done only in situation given in option (C).
23. Opening stock + closing stock – cost of goods sold = amount of purchase
Or 80,700 + 6,000 – 5,800 = Rs. 80,900

ANSWERS
24. Annual depreciation under SLM = (original cost – salvage value)/useful life = (1,26,000 – 6,000)/
6 = Rs. 20,000
25. Cost of goods sold = purchases + freight inward - closing stock = 90,000 + 6,000 – 12,000 = Rs.
84,000
Profit = sales – cost of goods sold = 1,20,000 – 84,000 = Rs. 36,000
26. Abnormal loss = cost of goods of the goods damaged + consignor’s expenses of the goods damaged-
the insurance claim received = 1/10 of 3,00,000 + 1/10of 5,000 – 3,000 = 30,000 + 500 – 3,000 = Rs.
27,500
27. Cash received on sales – opening stock – expenses incurred by A – expenses incurred by V +
drawings made by V = profit incurred
Or 15,000 – 10,000 – 1,000 – 1,000 + 2,000 = Rs. 5,000
28. Bank will be credited with full value of the bill i.e. Rs. 20,000
29. Stock with customers on approval will be shown in the balance sheet at cost price or market price
whichever is less. It will be shown as 3,500 – 800 = Rs. 2,700
30. Profit after allowing interest on capital will be distributed among A and B in their profit sharing ratio
3:2
So A will get 3/5 of 7,800 = Rs. 4,680
And B will get 3/5 of 7,800 = Rs. 3,120
31.
Partners Old ratio New ratio Sacrifice/gain Sacrificing ratio
A 5/8 7/16 5/8-7/16 = 3/16 A:B = 3/16:1/16 = 3:1
B 3/8 5/16 3/8-5/16 = 1/16
C — 4/16 Gain
32.
Particulars Amount Amount
Rs. Rs.
Balance as per cash book (Cr.) (1500)
Add: Cheques issued but not presented 100 + 50 + 125 275
Less: Cheques deposited but not cleared 400 (400)
______
Balance as per the pass book (Dr.) (1625)
______
33. Total cost of a fixed asset = cost of acquiring the asset + all other incidental cost involved in
bringing the asset into working situation

Amount debited to the car account = purchase cost + repairs + registration cost + dealers commission
= 10,000 + 1,000 + 500 + 1,200 = Rs. 12,700
34. Purchase return account (cr) under casted by Rs 84 and sales return account (dr) over casted by
Rs 84. Thus the debit side of the trial balance will be Rs 168 more than the credit side.
35. Difference in trial balance is due to wrong placing of Salaries A/c. Salaries account should come
on Dr. side instead of Cr. side.
36. Goodwill = (29,600 + 28,700 + 28,900 + 24,000 + 26,800) × 3/5 = Rs. 82,800 Share of D in goodwill
= 4/16 × 82,800 = Rs. 20,700
37. When there is forfeiture of shares which are issued at par the share capital account is debited with
the called up value of the shares forfeited.
So the amount to be debited to the share capital account will be 2,000 × 9 = Rs. 18,000
38. Amount to be transferred to capital redemption reserve account = face value of the shares to be
redeemed i.e.
Rs. 2,00,000 less proceeds from the new issue i.e. Rs. 1,50,000 = Rs. 50,000
39. Premium on redemption = 20% of Rs. 2,00,000 = Rs. 40,000
Amount to be written off every year = 40,000/5 = Rs. 8,000
40. Let × be the invoice value of goods sent out
Goods lost in transit will be 1/10 of × = Rs. 12,500
Thus × will be 10 × 12,500 = Rs. 1,25,000
41. Amount of consideration = Rs. 2,00,000
Total amount to be received on issue of debentures at 20% discount = Rs. 2,00, 000
So the actual amount of debentures issued = 200000 × 100/80 = Rs. 2,50,000
42. Forfeiture account will be credited with the amount already received in respect of the shares
forfeited, here it will be 30 × 2 = Rs. 60
43. Share of C in policy amount = 3/16 × total amount of policy i.e. 3/16 × (25,000 + 20,000 + 51,000)
= Rs. 18,000
44. New profit sharing ratio
Names Old ratio New ratio
A 3/5 3/5 × 4/5 = 12/25
B 2/5 2/5 × 4/5 = 8/25
C 1/5

ANSWERS
Now if the total capital after admission is × then

1/5 of x = x – 30,000 – 15,000 Or 4/5x = Rs. 45,000 Or x = Rs. 56,250
thus the share of C will be 1/5 of Rs. 56,250 = Rs. 11,250
45. When the incoming partner is not bringing goodwill and the goodwill is adjusted through the capital
accounts of the partners then NO goodwill will be shown in the balance sheet after admission. Thus
the value will be nil.
46. There is no partnership deed. Thus The Indian Partnership Act is to be applied for settling the
dispute. Interest on loan will be payable at 6% p.a.
Thus 6% on Rs. 80,000 will be the interest on loan = Rs. 4,800
The remaining profit 6,000 – 4,800 i.e. Rs. 1,200 will be distributed among the three partners
equally
Thus Rs. 400 for X, 4,800 + 400 = Rs. 5,200 for Y, and Rs. 400 for Z
47. Let the cost price be x. Then sale price will be 125% of x
Or 125% of × = Rs. 20,000
Thus × = 20,000 × 100/125 = Rs.16,000
48. Amount to be paid to C = 35,000 × 98/100 = Rs. 34,300
Amount of the bill endorsed = Rs. 30,000
Hence amount to be settled in cash = Rs. 4,300
49. Cost of the typewriter = Rs. 1,00,000
Let the sale price be × then profit is 20% of x
Thus cost = x – 20% of x = 1,00,000 or 80/100 x = 1,00,000 or x = 1,00,000 × 10/8 or x = Rs.
1,25,000
50. Cost of the goods sold = 45,000 × 2/3 × 9/10 = Rs. 27,000
Invoice value of the goods sold = 27,000 + 33.33% of 27,000 = 27,000 + 100/300 × 27,000
= 27,000 + 9,000 = Rs. 36,000
Sale price = 36,000 × 120/100 = Rs. 43,200
51. Rent paid for 1-1-2009 to 30-9-2009 = 1200 × 9/12 = Rs. 900
Rent paid for 1-10-2009 to 31-12-2009 = 1600 × 3/12 = Rs. 400
Thus rent paid shown in profit & loss account for the year ended 31-12-2009 = 900 + 400 = Rs.
1300

52. Sum of the years digit = 5(5 + 1)/2 = 15
Year Depreciable Depreciation Depreciation Accumulated
base factor expenses depreciation
1 3,00,000 5/15 3,00,000 × 5/15 = 1,00,000 1,00,000
2 3,00,000 4/15 3,00,000 × 4/15 = 80,000 1,80,000
3 3,00,000 3/15 3,00,000 × 3/15 = 60,000 2,40,000
4 3,00,000 2/15 3,00,000 × 2/15 = 40,000 2,80,000
5 3,00,000 1/15 3,00,000 × 1/15 = 20,000 3,00,000
Thus depreciation amount to be charged during the fifth year i.e. 2009-2010 will be Rs. 20,000
53. Let the closing stock be x
Then opening stock = x – 3,000
Average stock = (opening stock + closing stock)/2 = (x + x – 3,000)/2 = x – 1,500 = Rs. 12,000
Thus closing stock i.e. x = Rs. 13,500
54. Since the company is following FIFO method the closing stock i.e. (15 + 20 + 10 - 32) units = 13
units will be valued as follows: 10 units from the stock purchased on mark 6 and 3 units from the
stock purchased on mark 4 i.e. 10 units @ 460 per unit + 3 units @ 450/unit = 4,600 + 1,350 =
Rs. 5,950
55. Bank Reconciliation Statement as on 31-3-2012
Balance as per cash book(dr) 1,500
Add: cheques issued but not presented 150
Add: dividend collected by bank on behalf of ABC ltd 50
Add: interest paid on behalf of ABC ltd by bank 50
______ 250
Less: cheques deposited but not cleared 100 (100)
______
Balance as per the pass book 1,650
______
56. Purchase return account (cr) under casted by Rs. 1000 and sales return account (dr) over casted
by Rs. 1000. Thus the debit side of the trial balance will be Rs 2000 more than the credit side.
57. Amount to be capitalized = 2,50,000 + 19,000
And amount to be expensed off = 25,000 + 5,000 = Rs. 30,000

ANSWERS
58. The entry will be:

Cash/bank ...Dr 2100
To accounts receivable from Mohan 2100
59. The amount to be debited to share capital account will be the called up value of the shares forfeited
i.e. 1,000 × 18 = Rs. 18,000
60. Calculation of gaining ratio
Particulars Old ratio New ratio Gain Gaining ratio
A 2/5 2/3 2/3 - 2/5 = 4/15 2:1
B 2/5
C 1/5 1/3 1/3 - 1/5 = 2/15
Statement showing the required adjustment for goodwill
Particulars A B C
Right of goodwill before retirement 12,000 12,000 6,000
Right of goodwill after retirement 20,000 10,000
Gain/sacrifice 8,000 12,000 4,000

1. Book keeping is not a sub-field of Accounting.

2. Revenue from products’ sale is realized at the time of sale.
3. Expenses for an accounting period are recognised on ‘Matching’ principle.
4. Accounting principles, policies are standardized to ensure transparency, consistency and comparability.
5. Change in accounting estimate means differences between certain parameters estimated (or
restimated) and actual results achieved.
6. Inventory of raw materials is odd one out. All other three are fixed assets.
7. Double entry system affects two accounts.
8. Quantity of a particular product sold during the period will not be shown in general ledger.
9. In three column cash book, contra entries are passed.
10. For locating clerical errors, trial balance is prepared.
11. Present liability of uncertain amount which can be measured by using substantial degree of estimated
is provision.
12. Cheques issued but not presented will be added to the Debit balance of cash book in the given case.
13. FIFO will shown the highest value of closing inventory under inflationary conditions (rising prices).
14. P&L A/c is debited in case of downward revaluation of assets in the given case.
15. The portion of acquisition cost of asset (to be allocated to P&L A/c) is called Book value.
16. If decision to dispose of assets has taken place, assets should be indicated in the balance sheet at
NRV.
17. Petty cash balance is an asset.
18. Goods lying in the godown at buyer’s risk should be treated as sales.
19. The rate is 6% as per Indian Partnership Act, 1932.
20. If del-credere commission is allowed for bad debts, consignee will debit bad debts amount to
Commission earned as he has to bear this amount.
21. Cost concept is violated in the given case.
22. Matching concept supports the given calculation of profit.

ANSWERS
23. Premium on redemption = 20% of 2,00,000 = Rs. 40,000

Amount to be written off every year = 40,000/5 = Rs. 8,000
24. Amount to be transferred to capital redemption reserve account = face value of the shares to be
redeemed i.e. Rs. 2,00,000 less proceeds from the new issue i.e. Rs. 1,50,000 = Rs. 50,000
25. Let x shares were issued by Ltd.
Total value of shares at cost plus premium = x (100 + 25) = Rs. 7,50,000
Or 125x = Rs. 7,50,000
Or x = Rs. 7,50,000/125 = Rs. 6,000 shares
26. Dividend will be paid on the amount called up and received i.e. called up value – calls in arrears
Or dividend payable = 15% of (5,00,000 – 40,000) = 15% of 4,60,000 = Rs. 69,000
27. Total no. of shares = 80,00,000/100 = Rs. 80,000 shares
Fully paid shares = Rs. 77,500
Shares on which the calls are in arrear = Rs. 80,000 – 77,500 = Rs. 2,500
Calls in arrear in amount = Rs. 62,500
Final calls on 2,500 shares = Rs. 62,500
Thus final call on 1 share = 62,500/2,500 = Rs. 25
28. Let X be the selling price then profit = 20% of x
Cost = selling price – profit = X – 20% of x = 80% of x
Profit markup = (profit/cost price) × 100 = (.2x/.8x) × 100 = 25%
29. When any one of the partner dies the life insurance policy money is distributed among the partners in the
profit sharing ratio i.e.
A : 30,000 × 5/10 = Rs. 15,000
B : 30,000 × 3/10 = Rs. 9,000
C : 30,000 × 2/10 = Rs. 6,000
30. Amount to be transferred to B’s loan account will be:
Capital 50,000
Reserve 15,000 × 2/5 = Rs. 6,000
Goodwill 30,000 × 2/5 = Rs. 12,000
Profit on revaluation 7,050 × 2/5 = Rs. 2,820
Total = Rs. 70,820

31. Total capital contribute by C = Rs.25,000
Less: Capital towards goodwill = Rs.5,000
Closing capital balance = Rs.20,000
32. When a new partner enters in partnership firm, the old partner sacrifices his share for him, so it is the
duty of new partner to give goodwill in cash or in any other way to old partner. Under this problem, new
partner bring his share of goodwill in cash form in the firm and it is taken by old partner in their sacrifice
ratio.
R pays Rs. 9,000 for goodwill, half of which is withdrawn by P and Q
Withdrawal by P and Q = 1/2 of 9,000 = 4,500
New profit sharing ratio:
P’s share = 2/3 of 3/4 = 1/2
Q’s share = 1/3 of 3/4 = 1/4
P’s sacrifice = 2/3 – 1/2 = 1/6
Q’s sacrifice = 1/3 – 1/4 = 1/12
P and Q will withdraw in their sacrificing ratio i.e. 2 : 1
Thus P withdraws 2/3 of 4,500 = Rs. 3,000 and Q withdraws 1/3 of 4,500 = Rs. 1,500
33. Since C acquires 1/5th share from A and 1/10th share from B he acquires his share in the ratio 1/5 : 1/10
i.e. 2 : 1
Names Old ratio Sacrifice New ratio
A 5/8 3/10 × 2/3 17/40
B 3/8 3/10 × 1/3 11/40
C 3/10 12/40
The new ratio = 17 : 11 : 12
34. When the value of goodwill is not given in the question then hidden goodwill is calculated with reference
to the total capital of the firm and the profit sharing ratio.
Hidden goodwill is that goodwill the amount of which is not mentioned in the deed, but the amount of
which has to calculated by capitalisation method or with the help profit sharing ratio.
This method is generally used when the new partner is unable to bring in his share of goodwill which is at
the same time unknown. So to calculate the value of this hidden goodwill we will follow these steps:
1. First, we will multiply the capital brought by the new partner with his reciprocated ratio.
2. Secondly, we total up the actual capitals of all the partners including the capital brought by the new
partner as well.

ANSWERS
3 Then we deduct the total of actual capitals of all the partners from the assumed capital.
Hidden goodwill = 25,000 × 6 – (50,000 + 30,000 + 15,000 + 25,000) = Rs. 30,000
Share of C in hidden goodwill = 30,000 × 1/6 = Rs. 5,000 which will be shared by existing partners in 3 :
2 ratio
So, the capital account of C will show closing balance of 25,000 – 5,000 = Rs. 20,000
If the new partner brings in cash for his share of goodwill, in addition to his capital, it is known as premium
method.
Half of the premium = Rs. 5,000
Thus full premium = Rs. 10,000
Since D’s share i.e. ¼ of the total share in goodwill = Rs. 10,000
Total value of goodwill = 10,000 × 4 = 40,000
35. Hidden goodwill is that goodwill the amount of which is not mentioned in the deed , but the amount of
Thus Hidden goodwill = 12,000 × 4 – (10000 + 20000 + 12000) = Rs. 6,000
36. At the time of admission of a partner, existing partners have to surrendersome of their share in favour of
the new partner. The ratio in which they agree to sacrifice their share of profits in favour of incoming
partner is calledsacrificing ratio. Some amount is paid to the existing partners for their sacrifice. The
amount of compensation is paid by the new partner to the existing partner for acquiring the share of profit
which they have surrendered in the favour of the new partner.Sacrificing Ratio is calculated as follows:
Sacrificing Ratio = Existing Ratio – New Ratio
Names Old ratio New ratio Sacrifice/gain
A 5/8 7/16 5/8 - 7/16 = 3/16
B 3/8 5/16 3/8 - 5/16 = 1/16
C 4/16
Thus the sacrificing ratio = 3:1
37. Profit after allowing interest on capital = Rs. 7,800 which will be divided among the partners in the ratio
3:2
Thus profit apportioned to Bill = 3/5 of 7,800 = Rs. 4,680
And profit apportioned to Monika = 2/5 of 7,800 = Rs. 3,120
38. when goods are sent on approval basis then at the end of the financial year the goods lying with customers
will be valued at cost or market price whichever is less.
Let the cost price of the 100 articles sent on approval be x

Thus the sale price = 1.25x = 20,000
Thus the cost x = 20,000/1.25 = Rs. 16,000
39. In the case of any type of usance bill, if the due date calculated falls on a public holiday, the bill will
be deemed to fall due on the previous working day i.e.18th of july in this case.
40. When a person’s liabilities are more than his assets and he is not in a position to pay all of his debts when
they become due. Such a person is called insolvent.
When a person or party is declared by court as insolvent or bankrupt he is considered to be unable to pay
his liabilities. It means, the bills accepted by him will be naturally dishonored. Generally the amount
received from the estate of insolvent party is less than the amount due from him. The unsatisfied balance
is treated as bad debts.
Total amount due from bonny = Rs. 25,000
Thus when Bonny became insolvent and 50 paise is recovered from Bonny’s estate
Amount recovered from bonny = 50% of 25,000 = Rs. 12,500
41. Sometimes, acceptor of a bill finds himself unable to meet his acceptance on the due date. So he may
approach the drawer of the bill before the maturity date arrives, to cancel the old bill and draw a new bill
with extended date. The acceptor in this case will of course have to pay interest for the extended period.
Total amount of the bill = 8,000
Amount paid in cash = 4,000
Amount due = 4,000
Interest for 3 months @ 12% p.a. = 4,000 × 12/100 × 3/12 = 120
42. The drawer or holder of the bill may endorse (transfer) the bill in favor of his trades payable for the
clearance of his own debts.
Amount due to C = 35,000
Amount to be settled at 2% discount = 35,000 × 98/100 = Rs. 34,300
Amount of the bill endorsed = Rs. 30,000
Thus amount to be paid in cash = Rs. 4,300
43. Discounting bills of exchange is a financial service, where the Bank purchases drawn bills, from the
domestic trade transactions, confirmed in particular with an invoice — with right of recourse to you —
and credits you with the amount of the bill of exchange less discount interest and additional costs related
to the bill, accrued in advance from the discount date to the bill payment term.
Here amount of the bill = 50,000
Amount to be paid to bank on discounting at 12% pa = 50,000 × 12/100 × 3/12 = Rs. 1,500
Thus amount received from bank on discounting = 50,000 – 1,500 = Rs. 48,500

ANSWERS
The amount of remittance to B will be = 48,500/2 = Rs. 24,250

44. Total shares subscribed by public = 1,00,000 × 80% = Rs. 80,000
Remaining shares purchased by A and B = Rs. 20,000
Shares purchased by A in his profit sharing ratio = 3/5 of 20,000 = 12,000 shares
45. Sales price = Rs. 2,00,000
Add: drawings = Rs. 5,000
Less: purchase cost = Rs. 1,00,000
Less: transportation cost = Rs. 10,000
Less: insurance cost = Rs. 5,000
Less: selling exp. = Rs. 10,000
Thus profit = Rs. 80,000
46. Sale price of the 4/5th goods = Rs. 2,50,000
Cost of 4/5th goods = Rs. 2,00,000
Drawings = 1/5 of 2,00,000 – 20% of (1/5 of 2,00,000) = 40,000 – 8,000 = Rs. 32,000
Profit on venture = sale price less purchase cost add drawings = 2,50,000 – 2,00,000 + 32,000 =
Rs. 82,000
47. For goods taken over by coventurers, joint venture account will be credited by the amount of the goods
taken over i.e. Rs. 15,000 in this case.
48. Remuneration paid for services is called commission. Commission is always paid on sales. Here normal
commission = 2% of 70,000 = 1,400
Special commission = 20% of (gross sales-all commission-cost of goods sold)
Let special commission be x
Then x = 20% of (70,000 – 1,400 – x – 3/5 × 1,00,000) = 20% of (70,000 – 1,400 – 60,000 – x)
Or x = 20% of (8,600 – x)
Or x = 1,720 –.2x
Or 1.2x = 1,720
Or x = 1,433
Thus total commission = 1,433 + 1,400 = Rs. 2,833

49. The amount to be credited to trading account will be the balance of “Goods sent on consignment account”
this can be derived as follows:
Goods sent on consignment
Particulars Amount Particulars Amount
By Consignement A/c
(Rs. 120 × 1,000 Boxes) 1,20,000
To Consignment A/c
(Rs. 20 × 1,000 Boxes) 20,000
To Trading A/c 1,00,000
__________ __________
1,20,000
__________ 1,20,000
__________
50. Remuneration paid for services is called commission. Commission is always paid on sales. Extra commission
paid to consignee for timely collection of debs and for bad debts is called Del creder commission. Since
delcredere commission is given, the consignee will bear the bad debt loss
Thus profit on consignment can be determined as follows
Consignment a/c
To goods sent on consignment 2,00,000 By consignee A/c 2,10,000
To cash-expenses 5,000 By inventory on consignment 40,000
To consignee A/c-expenses 2,000
To consignee A/c-ordinary commission 3,000
To consignee A/c-delcredere commission 2,000
To profit and loss on consignment 38,000
__________ __________
2,50,000
__________ 2,50,000
__________
51. Cost of Goods Sold = Sales – Gross Profit.
Cost of Goods Sold = Opening inventory + Purchases + Direct Expenses – Closing inventory
Total cost of goods sent on consignment = Cost of the goods + expenses incurred by the consignor
= 1,00,000 + 5,000 = Rs. 1,05,000
1/5th of the consignment is still in transit = 1/5 of 1,05,000 = Rs. 21,000
52. Gross profit = Sales revenue – cost of goods sold
= Rs. 4,00,000 – Rs. 3,10,000 = Rs. 90,000
53. Cost of Goods Sold = Sales “ Gross Profit.

ANSWERS
Let x be the cost of goods sold

Then profit = 25% of x
Thus sales = x + 25% of x = 1.25x = Rs. 2,000
Or x = 2,000/1.25 = Rs. 1,600
54. Straight line method depreciates cost evenly through out the useful life of the fixed asset.
Straight line depreciation is calculated as follows:
Depreciation per annum = (Cost – Residual Value) / Useful Life
Where:
Cost includes the initial and any subsequent capital expenditure.
Residual Value is the estimated scrap value at the end of the useful life of the asset. As the residual value
is expected to be recovered at the end of an asset’s useful life, there is no need to charge the portion of
cost equaling the residual value.
Useful Life is the estimated time period an asset is expected to be used from the time it is available for
use to the time of its disposal or termination of use.
Since repair on the machinery was made on 1.7.2009 and not before the machinery was put to use and
it was also not a capital expenditure, it will not be considered while calculating the cost of the machinery.
Cost of the machinery = purchase price + installation expenses = 1,20,000 + 10,000 = 1,30,000
Depreciation = 10% of 1,30,000 = Rs. 13,000
55. To calculate the gain or loss on the sale of a fixed asset, one has to figure out the asset’s book value up
to the date of sale.
Under WDV method, depreciation is charged at a fixed rate every year, on the reducing balance. A
certain percentage is applied to the previous year’s book value, to arrive at the current year’s depreciation/
book value, which shows a declining balance, weighted for earlier years, and lower and lower for later
years, as the machine grows older.
Lets find the WDV as on 30-9-2010 of the machine in question
original cost as on 1-3-2009 = 60,000
31-3-2010 depreciation @ 20% pa = 60,000 × 0.2 = Rs. 12,000
31-3-2010 wdv = 60,000 – 12,000 = Rs. 48,000
30-9-2010 depreciation for the half year = 48, 000 × 20% × ½ = Rs. 4,800
30-9-2010 wdv = 48,000 – 4,800 = Rs. 43,200
30-9-2010 sale price = 30,000
Thus loss on sale = 43,200 – 30,000 = Rs. 13,200

56. Let the cost of goods sold = x
Then sale price will be = x + 1/3 of x = 4/3 x = 13,00,000
Thus x = 13,00,000 × 3/4 = 9,75,000
Thus closing inventory = opening inventory - cost of goods sold = 12,00,000 – 9,75,000 = Rs. 2,25,000
57. The cost of goods sold = opening inventory + purchases - closing inventory = 1,80,000 + 3,30,000 –
90,000 = 4,20, 000
Sales = cost of goods sold + profit = 4,20,000 + 25% of 4,20,000 = Rs. 5,25,000
58. Cheques issued (not presented) will be added to the balance as per cash book in the given case.
59. Wages for erecting machine should be debited to machinery account.
60. Amount spent for overhauling of second hand machine is capital expenditure.

ANSWERS

1. Ledger posting is not a function of accounting, it is work of book keeping.

2. Manufacturing account is required to calculate cost of manufactured goods.
3. It is an event not a transaction.
4. Financial statements consider assets and liabilities expressed in money terms.
5. Balance sheet represents accounting equation.
6. Since we follow dual aspect concept
So either it is increase in one asset and decrease in other
Or its increase in asset and increase in liability
In the asset side:
Increase in fixed asset (car) = 5,00,000
Decrease in cash in hand = 1,00,000
Thus total increase in asset = Rs. 4,00,000
In the liabilities side:
Increase in bills payable = Rs. 4,00,000
Thus Total assets increased by Rs. 4,00,000 with corresponding increase in liabilities by Rs. 4,00,000
7. Bad debts recovered are credited to Bad debts recovered amount.
8. Withdrawal by proprietor are debited to drawings A/c and credited to Cash A/c.
9. Contra entries are passed in three column cash book.
10. Consignment A/c is nominal as it shows profit/loss.
11. Due to periodicity concept, life of an enterprise is divided into accounting periods (intervals).
12. Accounting policies refer to accounting principles and methods of applying those principles.
13. Dividends are paid on paid up capital.
14. Remaining partners contribute to compensation amount in gaining ratio.
15. Petty cash balance is asset.

16. Interest on capital to be paid only from profits in given case.
17. Performa invoice is sent by consignor to consignee.
18. In the given case, discount charges will be recorded in Memorandum A/c.
19. Z will be payee of bill.
20. Here profit margin on sale is given and we are required to find the profit margin on cost. This can be done
as follows:
Let the selling price be x
Then profit = 20% of x = .2x
Thus cost price = selling price – profit = x – . 2x = 0.8x
And the markup on cost will be = 0.2/0.8 × 100 = 25%
21. Conservatism concept is being violated in given case.
22. Objection of auditor is justified only in situation given in option (C).
23. Inventory should be valued at lower of cost or net realizable value. Pricing of inventory assumes significance
when different lots are purchased at varying prices at different timings.
So in this case
Car Fiat Ambassador Maruti Esteem Maruti 800 Zen
Cost Rs. 90,000 1,15,000 2,75,000 1,00,000 2,10,000
Net realisable value (Rs.) 95,000 1,55,000 2,65,000 1,25,000 2,00,000
Value of inventory 90,000 1,15,000 2,65,000 1,00,000 2,00,000
Total value = Rs. 7,70,000
24. Sum of years digits method takes the asset’s expected life and adds together the digits for each year. So
if the asset was expected to last for six years, the sum of the years’ digits would be obtained by adding:
6 + 5 + 4 + 3 + 2 + 1 to get a total of 21.Each digit is then divided by this sum to determine the percentage
by which the asset should be depreciated each year, starting with the highest number in year 1 i.e. 6 in
this case.
Total depreciable Depreciation Depreciation Accumulated Book value
cost rate expense depreciation at end of year
1,26,000
(original cost)
1,26,000 6/21 36,000 36,000 90,000
(1,26,000 × 6/21)
So Rs. 36,000 is the depreciation expenses in year 1.

ANSWERS
25. Operating expenses is not considered in calculation of gross profit .

Thus gross profit = sales – cost of goods sold = 4,00,000 – 3,10,000 = Rs. 90,000
26. Closing inventory = opening inventory + purchases – cost of goods sold
Cost of goods sold = x (say) = total sales – gross profit = 80,000 – 25% of 80,000
Or x = 80,000 – 20,000 = 60,000
Purchases = cost of goods available for sale – opening inventory = 1,00,000 – 20,000 = 80,000
Thus closing inventory = 20,000 + 80,000 – 60,000 = Rs. 40,000
27. The venture was entered for purchase and sale of a particular piece of land. So the profit will be
ascertained by deducting purchase price from the sale price as there are no other expenses given in the
question and the contribution of A and B will be used to determine the profit sharing ratio of the venture.
Thus profit = 60,000 – 20,000 = 40,000
28. When a person or party is declared by court as insolvent or bankrupt he is considered to be unable to pay
his liabilities. It means, the bills accepted by him will be naturally dishonored. Therefore, when it is known
that a person has become insolvent, entry for the dishonor of the bill of exchange should be passed both
in the books of the drawer and acceptor.
Later on something may be received from his estate. When the amount has been received casdh account
will be debited and the personal account of the person will be credited.
Here 40 p per rupee has been recovered . thus amount recovered will be 40% of 50,000 = Rs. 20,000
29. Average inventory = (opening inventory + closing inventory)/2 = 12,000
Or (opening inventory + closing inventory) = 12,000 × 2 = 24,000 ... (1)
Given closing inventory = opening inventory + 3,000
Closing inventory – opening inventory = 3,000 ... (2)
Adding (1) and (2)
2 closing inventory = 27,000
Closing inventory = 27,000/2 = Rs. 13,500
30. Steps to be followed:
(a) Determine the normal rate of return i.e. 15%
(b) Find out the average profit of the partnership firm. In this case it is Rs. 12,00,000
(c) Determine the capital employed i.e. 8,00,000
(d) Find out the normal value of the business by dividing average profit by normal rate of return. In
this case it would be 12,00,000/15% = 80,00,000

(e) Deduct average capital employed from the normal value of business to arrive at goodwill. Here
goodwill will be = 80,00,000 – 8,00,000 = Rs. 72,00,000
31. The sacrificing ratio is the ratio which indicates the sacrifice made by the old partners in their profit
sharing to bring in the new partner. Below table shows the calculation of the sacrificing ratio.
Partners New share Old share Sacrificing ratio
A 7/16 5/8 5/8 – 7/16 = 3/16
B 5/16 3/8 3/8 – 5/16 = 1/16 or 3 : 1
C 4/16
32. Bank reconciliation statement as on …
Balance as per cash book (Cr) (1,500)
Add:
Cheques issued but not presented for payment 100 + 50 + 125 275
Less:
Cheques deposited but not cleared 400 (400)
_______
Balance as per pass book (Dr) (1,625)
_______
33. The cost of a depreciable asset is made up of:
• The net cost of the asset.
• The cost of site preparation.
• Initial delivery and handling costs.
• Installation costs.
• Professional fees (architects and engineers etc) relating to having the asset in place and ready to
work.
• Other cost incurred to make the asset work, i.e. computer software for a computer.
• Capital improvements made after the initial purchase (not to be confused with repairs and
maintenance).
• In summary, the cost of acquisition includes the purchase cost plus any reasonable costs incurred
in placing the asset into a position where it is ready for use.
The amount debited to machinery account will be
Purchase cost + transportation cost + installation cost = 10,000 + 1,500 + 1,200 = 12,700

ANSWERS
34. Sales = opening inventory + purchases less return + gross profit – closing in ventory
Let sales be x = 22,000 + 1,10,000 + 20% of x – 25,000
Or x = 1,07,000 + 20% of x
Or x – 20% of x = 1,07,000
80% of x = 1,07,000
x = 1,07,000 × 100/80 = Rs. 1,33,750
35. The difference is due to wrong placing of salaries A/c. Salaries A/c should have come on Dr. side instead
of Cr.
36. Under this method goodwill is calculated on the basis of the average of some agreed number of past
years. The average is then multiplied by the agreed number of years.
Goodwill = Average Profits × Number of years of Puchase
Before calculating the average profits the following adjustments should be made in the profits of the firm:
(a) Any abnormal profits shoulld be deducted from the net profits of that year.
(b) Any abnormal loss should be added back to the nat profits of that year.
(c) Non operating incomes eg. income from investments etc should be deducted from the net profits
of that year.
Here average profit of last 5 years will be (85,000 + 90,000 + 70,000 + 1,00,000 + 80,000)/5 = 85,000
Agreed number of years = 3 years
Thus goodwill = 85,000 × 3 = Rs. 2,55,000
37. Abnormal Loss: It refers to the abnormal loss of stock due to fire, theft or accident. If any abnormal loss
is there, goods destroyed will be credited to the Trading Account and will be debited to P&L account
after adjusting insurance claim and salvage value because the Trading Account is prepared under normal
conditions of the business and has no place for abnormal instances.
Gross profit = sales – cost of goods sold (COGS)
Let COGS = x then
Or 4/3 of x = 2,00,000
Or x = 1,50,000
Or Gross profit = 1/3 of 1,50,000 = 50,000
Closing inventory = opening inventory + purchases + gross profit – sales – goods destroyed =
80,000 + 1,60,000 + 50,000 – 2,00,000 – 30,000 = Rs. 60,000

38. Trading account discloses the gross profit and gross loss and for this it only records the sales and direct
cost of goods sold. Following is the trading account for the given question :
Trading account for the year ended…
To opening inventory 20,000 By sales 1,40,700
To purchases 85,800 By closing inventory 18,000
To carriage on purchases 2,300
To gross profit 50,600
_______ _______
1,58,700
_______ 1,58,700
_______
39. The shares are being issued at a premium thus the value of each share issued will be 100 + 25 = Rs. 125
Total value of assets acquired = 7,50,000
Number of shares issued = total value of shares acquired/value per share = 7,50,000/125 = 6,000 shares
40. Invoice value of the goods lost = 1/10th of the total invoice value of the goods sent = 12,500
Thus total invoice value of the goods sent = 12,500 × 10 = Rs. 1,25,000
41. The debentures are being issued at a discount thus the value of each debenture will be 100 – 20 = Rs. 80
Total value of machinery purchased = 4,00,000
Number of debentures issued in consideration = total value of machinery purchased/value per debenture
= 4,00,000/80 = 5,000 debentures
Thus the actual value of the debentures issued = 5,000 × 100 = Rs. 5,00,000 should be credited to
debentures account.
42. Premium on redemption = 20% of 5,00,000 = Rs. 1,00,000
Amount to be written off every year = 1,00,000/10 = Rs. 10,000
43. When a new partner is admitted in the firm, the existing/old partners have to sacrifice, what is given to
the new partner, from their future profits, the reputation they have gained in their past efforts and the side
of capital they have taken before. The new partner when admitted, has to compensate for all these
sacrifices made by the old ones. The compensation for such sacrifice can be termed as ‘goodwill’.
Hence, at the time of admission of the new partner, it is necessary to account the valuation of goodwill in
the firm.
If the new partner brings in cash for his share of goodwill, in addition to his capital, it is known as
premium.
The premium brought in by Z in the above case = Rs. 4,500 which equals to his share in the firm which
is 1/6
Thus the total value of goodwill of the firm will be 4,500 × 6 = Rs. 27,000

ANSWERS
Goodwill = Average Profits × Number of years of Purchase
Here average profit of last 3 years will be (42,000 + 39,000 + 45,000)/3 = 42,000
Thus goodwill = 42,000 × 2 = Rs. 84,000
45. When the company has the debentures in Financial statements with entitlement to interest.
Interest will accrue on a timely basis e.g. Month to month or period to period.
However the so accrued will become accrued and due on the said due dates.
If the company has to prepare the financial statements, it has to provide for the interest expense up to
that period and show it under interest accrued but not due.
Here half yearly interest gets due on 30th Jun and we are closing books on 31st march. Thus interest
accrued but not due will be for 3 months i.e. from 1st April 2010 to 30th Jun 2010
Or interest accrued but not due = 20,00,000 × 14% × 3/12 = Rs. 70,000 will be shown under current
liabilities.
46. Profit on venture can be ascertained by deducting the purchase cost and all expenses from the sales
proceeds. Here commission to the partners are also considered as expenditure. Thus profit on venture =
sale proceeds – purchases – commission to A – commission to B = 2,50,000 – 2,00,000 – 1% of 2,00,000
– 5% of 2,50,000 = Rs. 35,500.
47. Straight line method depreciates cost evenly through out the useful life of the fixed asset.
Where:
• Cost includes the initial and any subsequent capital expenditure.
• Residual Value is the estimated scrap value at the end of the useful life of the asset. As the
residual value is expected to be recovered at the end of an asset’s useful life, there is no need to
charge the portion of cost equaling the residual value.
• Useful Life is the estimated time period an asset is expected to be used from the time it is
available for use to the time of its disposal or termination of use.
Since repair on the machinery was made on 1.7.2010 and not before the machinery was put to use and
it was also not a capital expenditure, it will not be considered while calculating the cost of the machinery.
Cost of the machinery = purchase price + installation expenses = 1,20,000 + 10,000 = 1,30,000
Depreciation = (1,30,000 – 5,000)/5 = Rs. 25,000

clearance of his own debts. A bill of exchange is a “negotiable instrument” i.e. a document which is
transferable by delivery without notice to the party liable (drawee).
Total amount to be settled = 35,000
Amount to be settled after discount = 35,000 × 98% = Rs. 34,300
Value of the bill endorsed = 30,000
Thus amount to be settled in cash = 34,300 – 30,000 = Rs. 4,300
49. Total cost of the rice = purchase cost + carriage inward + insurance expenses = 2,00,000 + 2,000 + 3,000
= Rs. 2,05,000
1/5th inventory was taken over by B on cost will be equal to 1/5th of 2,05,000 = Rs. 41,000
50. When goods are sent on approval basis then at the end of the financial year the goods lying with customers
will be valued at cost or market price whichever is less. Thus goods lying with customers will be 55,000
× 2 = Rs. 1,10,000
51. Expense must be recorded in the accounting period in which it is incurred. Therefore, prepaid expense
must be not be shown as expense in the accounting period in which it is paid but instead it must be
presented as such in the subsequent accounting periods in which the services in respect of the prepaid
expense have been performed.
Thus electricity expenses paid for the current year will be shown in the profit and loss account.
Electricity charges paid = 1-1-2009 to 30-9 -2009 + 1-10-2009 to 31-12-2009 = 2,400 × 9/12 + 3,200 ×
3/12 = 1,800 + 800 = Rs. 2,600
52. Invoice value = cost + markup
Invoice value = 2,00,000 + 20% of 2,00,000 = 2,00,000 + 40,000 = Rs. 2,40,000
53. On the death of a partner, The representatives are entitled to Share of profit upto the date of death.
Thus share in profits for the period 1st April 2010 to 30th June 2010 to be credited to D’s Account will be
calculated as follows:
Profit for the period will be 24,000 × 3/12 = 6,000
Share of D in profit = 4/16 of 6,000 = Rs. 1,500
54. Invoice value of goods sold = 4/5 of 2,00,000 = 1,60,000
Sales value = 1,76,000
Surplus of sales above invoice value = 1,76,000 – 1,60,000 = Rs. 16,000
Thus commission = 2% of 1,60,000 + 10% of 16,000 = 3,200 + 1,600 = Rs. 4,800

ANSWERS
55. Bank Reconciliation Statement as on 31-3-2012

Balance as per cash book (dr) 1500
Add:
Cheques issued but not presented 150
Dividend collected by bank on behalf of ABC Ltd. 50
Interest allowed by bank 50
_____ + 250
Less:
Cheques deposited but not cleared 100
_____ (100)
_____
Balance as per the pass book 1650
_____
56. In the given case, total of Dr. side of trial balance will be Rs.2,000 more than Cr. Side.
57. If the capital of the new partner is given, the entire capital of the new firm will be determined on the basis
of the new partner’s capital and his profit sharing ratio. Therefore the capital of other partners is ascertained
by dividing the total capital in the new profit sharing ratio.
New profit sharing ratio
Names Old ratio New ratio
A 5/8 5/8 × 4/5 = 1/2
B 3/8 3/8 × 4/5 = 3/10
C 1/5
Capital of Z = 1,20,000 which is 1/5th of the total capital
Thus capital balance of X and Y will be
Capital of X = 1,20,000 × 1/2 × 5 = 3,00,000
Capital of Y = 1,20,000 × 3/10 × 5 = 1,80,000
58. For journal entry for renewal in books of A will be, BR and cash will be debited and L and interest will be
credited. Thus option (A) is correct.
59. When shares issued at par are forfeited the accounting treatment will be as follows:
(i) Debit Share Capital Account with amount called up (whether received or not) per share up to the
time of forfeiture.
(ii) Credit Share Forfeited A/c with the amount received up to the time of forfeiture.
(iii) Credit ‘Unpaid Calls A/c’ with the amount due on forfeited shares. This cancels the effect of
debit to such calls which take place when the amount is made due.

So the amount to be debited to share capital account will be = total number of shares forfeited × called up
value of each share = 2,000 × 9 = Rs. 18,000
60. At the time of retirement of a partner an adjustment is necessary in respect of the goodwill. the retiring
partner is entitled to his share of goodwill in the firm. In absence of agreement goodwill is to be distributed
in the profit sharing ratio.
Thus the contribution of X and Z to compensate Y will be
Y’s share in goodwill = 30,000 × 2/5 = 12,000
X’s contribution = 12,000 × 2/3 = 8,000
Z’s contribution = 12,000 × 1/3 = 4,000

ANSWERS

1. Opening inventory consists of Raw Materials, Work in progress and Finished goods.
2. Closing inventory is shown in Trial Balance and not opening in case of adjusted purchases being shown
in trial balance.
3. Owners, Management and employees are internal users. Govt. is external user of financial statements.
4. As per Business entity concept, Business is separate and distinct from the providers of Capital.
5. As per going concern concept, fixed assets are acquired for use in the business for earning revenues and
are not meant for sale.
6. Type of entries mentioned in the question are called compound journal entries.
7. In the given case, balance as per pass book will be more than the balance as per cash book by amount of
unpresented cheque.
8. Errors (if noticed) should be rectified without waiting the accounting year to end.
9. Drawer, Drawee and Payee all are parties to bill of exchange.
10. All expenditures and receipts of revenue nature go to either trading or P& L A/c.
11. Credit not is sent to customer when he returns the goods.
12. Noting charges are paid at time dishonour of bill.
13. Depreciation of fixed asset is revenue.
14. Interest on drawings is gain for business.
15. The transaction would affect both A and B.
16. Dep. is charged by allocating depreciable cost in proportion of annual output to the life time output is
Production units method.
17. A bill drawn outside India on person resident in India is foreign bill.
18. General Reserve at time of admission of new partner is transferred to the old partner’s Capital accounts.
19. A suspense A/c facilitates preparation of Financial Statements even when Trial Balance has not tallied.
20. Recording of transactions in ledger is called posting.
21. The referred norms are called Accounting Standards.

22. In the given case, the treatment by auditor is justified due to Historical cost concept.
23. Mr. A started his business on 1st Jan 2009 with cash thus there was no opening inventory and hence the
opening inventory to be shown in trial balance of Mr. A for the year will be nil.
24. The provision created to cover the next year’s bad debt expense out of the current year’s debtors is
known as provision for bad debts. The provision for bad debt is calculated on the debtors’ balance
obtained after deducting the bad debt written off.
The provision created to cover the expense of discount that may be allowed to the debtors during the
coming year when they pay their debt on time. The provision for discount on debtors is calculated on the
debtors balance after deducting the bad debt and the provision for bad debt amount.
Thus provision for doubtful debt = 5% of (55,200 – 200) = Rs.2,750
25. According to annuity method, the purchase of the asset concerned is considered an investment of capital,
earning interest at certain rate. The cost of the asset and also interest thereon are written down annually
by equal installments until the book value of the asset is reduced to nil or its bread up value at the end of
its effective life. The annual charge to be made by way of depreciation is found out from annuity tables.
The annual charge for depreciation will be credited to asset account and debited to depreciation account,
while the interest will be debited to asset account and credited to interest account.
Thus depreciation to be charged = asset value × the annuity = 40,000 × .230975 = Rs. 9,239
26. Under the diminishing balance method or Written Down Value Method, depreciation according to a fixed
percentage calculated upon the original cost (in the first year) and written down value, (in subsequent
years) of an asset, is written off during each accounting period over the expected useful life of the asset.
Under this method, the rate of depreciation remains constant year after year whereas the amount goes
on decreasing.
Let the cost of the asset when purchased be x
1st april 2007 Cost of machine x
31-3-2008 Depreciation @10% .1x
31-3-2008 wdv .9x
31-3-2009 depreciation@10% 10% of .9x = .09x
31-3-2009 wdv .9x – .09x = .81x
31-3-2010 depreciation@10% .081x
31-3-2010 wdv .81x – .081x = .729x = 72,900
So 0.729x = 72,900
x = Rs. 1,00,000 = the cost of the machine
27. When the company has the debentures in Financial statements with entitlement to interest. Interest will
accrue on a timely basis e.g. Month to month or period to period.

ANSWERS
However it will become accrued and due on the said due dates. If the company has to prepare the
financial statements, it has to provide for the interest expense up to that period and show it under interest
accrued but not due.
Interest from 1-5-2009 to 30-9-2009 i.e. for 5 months from the date of issue of debentures = 7% of
40,00,000 × 1/2 × 5/6 = 1,16,667
Interest from 1-10-2009 to 31-3-2010 = 7% of 40,00,000 × 1/2 = 1,40,000
Total interest to be debited to profit and loss for the year ended 31-3-2010 will be = 1,16,667 + 1,40,000
= Rs. 2,56,667
28. A Company can’t issue redeemable Pref. Shares for a period exceeding 20 years (if not issued for
infrastructure projects).
29. When issue is over-subscribed, the company will have to allot to each applicant according to the number
of share applied by him. The excess application money is adjusted towards the sum due on allotment. Pro
rata actually means ‘in proportion’.
So the proportion in which the shares will be allted = total shares allotted/total shares applications received
= 10,000/14,000 = 5/7
F applied for 420 shares so the total shares allotted to him will be = 420 × 5/7 = 300 shares
So excess application money received from F = (420 – 300) × 2 = Rs. 240
time of forfeiture.
(ii) Credit Share Forfeited A/c. with the amount received up to the time of forfeiture.
So the amount to be debited to share capital account will be = total number of shares forfeited × called up
value of each share = 200 × 8 = Rs. 1,600
31. On the death of a partner, the representatives are entitled to Share of profit upto the date of death.
Thus share in profits for the period 1st April 2010 to 30th June 2010 to be credited to D’s Account will
be calculated as follows:
Estimated Profit for the period based on last year’s profit will be 24,000 × 3/12 = 6,000
will be valued at cost or market price whichever is less. Thus goods lying with customers will be 55,000
× 2 = Rs. 1,10,000.
33. The cost of a depreciable asset is made up of:

• The net cost of the asset.
• The cost of site preparation.
• Initial delivery and handling costs.
• Installation costs.
• Professional fees (architects and engineers etc) relating to having the asset in place and ready to
work.
• Other cost incurred to make the asset work, ie computer software for a computer.
• Capital improvements made after the initial purchase (not to be confused with repairs and
maintenance).
In summary, the cost of acquisition includes the purchase cost plus any reasonable costs incurred in
placing the asset into a position where it is ready for use.
So the amount debited to car account will be = purchase cost + initial repairs + registration + dealers
commission = 10,000 + 1,000 + 500 + 1,200 = Rs. 12,700
34. If noting charges are paid by the bank (if the bill has been discounted) it will be realised by the bank from
the drawer, who will charge it from drawee.
Thus the bank will deduct from A’s bank balance the amount of the bill plus noting charges.
i.e. 12,000 + 20 = Rs. 12,020
35. Cost of the goods sold = 40,000
Sale price of the goods sold = 50,000
Profit on sale = 50,000 – 40,000 = 10,000
Profit margin on cost = profit/cost × 100 = (10,000/40,000) × 100 = 25%
Cost of the goods taken over by B = total goods – goods sold = 42,500 – 40,000 = 2,500
Amount at which the goods are taken over by B = 2,500 + 25% of 2,500 = 2,500 + 625 = Rs. 3,125
36. Whenever partners withdrew money from the partnership firm for their private purpose it could be
termed as drawings. Interest is charged on drawings for the reason that the amount has been withdrawn
by the partners without allowing it for being used for the purpose of the business. Where the Drawings
are made at regular intervals, all the drawings are converted to an equivalent of drawings for a specified
period and interest is calculated thereon.
Drawings of X at the end of each month =
Interest on drawings = 5% of 200 × (11 + 10 + 9 + …. + 3 + 2 + 1)/12
= 5% of 200 × (11(11 + 1)/2)/12 = 5% of 13,200/12 = Rs. 55

ANSWERS
Goodwill = Average Profits X Number of years of Purchase

Average profit of the last four years = (18,000-8,500 + 30,000 + 16,500)/4 = 14,000
Goodwill = 14,000 × 11/2 yrs. = Rs. 21,000
time of forfeiture.
Thus amount to be credited to the share forfeited account = no. af shares allotted to A × amount received
by A = 100 × 6 = Rs. 600
39. BRS as on 31-3-2012
Balance as per cash book (dr) 5,000
Add:
Cheques issued but not presented 2,000
_______ 2,000
Less:
Cheques deposited but not cleared 1,500
Wrong debit by bank 20
_______ (1,520)
_______
Balance as per the pass book (cr) 5,480
_______
40. When the company has the debentures in Financial statements with entitlement to interest.
Interest will accrue on a timely basis e.g. month to month or period to period.
If the company has to prepare the financial statements, it has to provide for the Interest expense up to
Amount of interest accrued on 31st Dec. will be for the period Oct. to Dec. = (6% of 30,000) × 3/12 = Rs.
450
41. The provision created to cover the next year’s bad debt expense out of the current year’s debtors is
known as provision for bad debts. This provision is created on the debtors after deducting the current
year’s bad debt.
Accounts receivable = 30,000
Less furthur bad debts = 3,000

Provision for bad debts = 10% of (30,000 – 3,000) = Rs. 2,700
42. The drawings are usually made by the partners at regular intervals. Thus, the interest on drawings is
calculated with reference to the time period involved.
Monthly/quarterly drawings method: If uniform amount is withdrawn at each time and the interval between
two withdrawals also is uniform. In such a case interest on drawings is calculated with monthly drawings
method. Time period in this method is calculated as follows:
When drawings are for 12 months period and at the beginning of each month = Total drawings × Rate/
100 × 6.5/12
So interest on drawings of A will be = 1,000 × 12 × 10/100× 6.5/12 = 650
And interest on drawings of B will be = 500 × 12 × 10/100× 6.5/12 = 325
Total interest on drawings = 650 + 325 = Rs. 975
43. Profit of the firm before allowing interest on capital = Rs. 3,900
Interest on capital of A = 5% of 40,000 = Rs. 2,000
Interest on capital of B = 5 % of 25,000 = Rs. 1,250
Profit after interest = 3,900 – 2,000 – 1,250 = Rs. 650
The profit sharing ratio of A and B is 3 : 2
Thus profit shared by A = 650 × 3/5 = Rs. 390
And profit shared by B = 650 × 2/5 = Rs. 260
44. The expenditure will shown as prepaid expense in Financial statements for the year ended 31.12.09.
Total amount of the bill = 8,000
Amount paid in cash = Rs. 2,000
Amount due = Rs. 6,000
Interest for 3 months @18%pa = 6,000 × 18/100 × 3/12 = Rs. 270
The amount of renewed bill will be = 6,000 + 270 = Rs. 6,270
46. Straight line method depreciates cost evenly throughout the useful life of the fixed asset.

ANSWERS

Where:
Cost of the machinery = purchase price + installation expenses + carriage = 50000 + 2000 + 4000 = Rs.
56,000
Depreciation = (56,000 – 6,000)/10 = Rs. 5,000
47. Partners are entitled to receive interest at an agreed rate of interest on any Loan given by them to the
firm. Interest on Loan is a charge against profits so a partner is entitled to receive interest whether there
are profits or not. If there is no agreement regarding the rate of interest, it is taken as 6% p.a.
So as nothing is mentioned in the deed of partnership regarding the interest on loan so interest on Gopal’s
loan will be paid at 6% pa.
Interest on Gopal’s loan will be = 6% of Rs. 12,000 = Rs. 720
48. Interest is paid on capital for the reason that it has been used for the purpose of the partnership business.
Since the capital was contributed on 1 July, 2009 and the books are being closed on 31st Dec. 2009. Thus
interest on capital will be calculated for half a year:
For A = 40,000 × 10% × 6/12 = 2,000
For B = 50,000 × 10% × 6/12 = 2,500
So total interest on capital will be = Rs. 4,500
49. Under this method Goodwill is calculated on the basis of Super Profits i.e. the excess of actual profits
over the average profits.
For calculating Goodwill:
(i) Normal Profits = Capital Invested × Normal rate of return/100
(ii) Super Profits = Actual Profits – Normal Profits
(iii) Goodwill = Super Profits × No. of years purchased
Here normal profit = 4,00,000 × 12.5% = 50,000
Super profit = 60,000 – 50,000 = 10,000
Goodwill = 10,000 × 2 = Rs. 20,000

50. To calculate the gain or loss on the sale of a fixed asset, one has to figure out the asset’s book value up
to the date of sale.
Under WDV method, depreciation is charged at a fixed rate every year, on the reducing balance. A
years, as the machine grows older.
Lets find the WDV as on 1-07-2010 of the machine in question
Original cost as on 1-1-2009 = 2,00,000
31-12-2009 depreciation @20%pa = 2,00,000 × 0.2 = 40,000
31-12-2009 wdv = 2,00,000 – 40,000 = 1,60,000
30-6-2010 depreciation for the half year = 1,60,000 × 20% × 1/2 = 16,000
30-9-2010 wdv = 1,60,000 – 16,000 = 1,44,000
30-9-2010 sale price = 1,60,000
Thus profit on sale = 1,60,000 – 1,44,000 = Rs. 16,000
51. The basic accounting equation, also called the balance sheet equation, represents the relationship between
the assets, liabilities, and owner’s equity of a business. It is the foundation for the double-entry bookkeeping
system. For each transaction, the total debits equal the total credits. It can be expressed as
Assets = Liabilities + Capital
So here Assets = cash brought in as capital + sales proceeds received in cash + closing inventory
= 50,000 + 3,600 + (20,000 – 3,000) = 70,600
Liabilities = accounts payable on account of purchases made on credit = 20,000
owners equity = cash brought in + profit = 50,000 + 600 = 50,600
thus assets = liabilities + owners equity
52. Value of physical stock as on 15.4.2010 = Rs. 3,00,000
Add cost of goods sold between 31-3-2010 and 15-4-2010 = 1,00,000 × 80% = Rs. 80,000
Less purchases made between 31-3-2010 and 15-4-2010 = 50,000
Value of closing stock as on 31-3-2010 = Rs. 3,30,000
53. Joint Venture a/c
Date Particulars Amount Date Particulars Amount
To Coventurers a/c-A-supplies 1,00,000 By Coventurers a/c 1,20,000
To Coventurers a/c-B-freight By Closing Stock 5,250

ANSWERS
and Insurance 5,000 (1,05,000 × 5/100)

To Coventurers a/c-profit 20,250
_______ _______
1,25,250
_______ 1,25,250
_______
54. For rectification, Ramesh will be debited by Rs. 1,000 with corresponding credit to Sales Return.
55. L ast-In, First-Out is one of the common techniques used in the valuation of inventory on hand at the end
of a period and the cost of goods sold during the period. LIFO assumes that goods which made their way
to inventory (after purchase, manufacture etc.) later are sold first and those which are manufactured or
acquired early are sold last. Thus LIFO assigns the cost of newer inventory to cost of goods sold and
cost of older inventory to ending inventory account. This method is exactly opposite to first-in, first-out
method.
Date Purchases Sales Balance
Units Unit Cost Total Units Unit Cost Total Units Unit Cost Total
March 4 900 5 4,500 900 5 4,500
March 5 600 5 3,000 300 5 1,500
March 10 400 5.50 2,200 300 5 1,500
400 5.5 2,200
March 12 400 5.5 2,200 300 5 1,500
th
Closing inventory as on 15 March will be Rs. 1500
56. Cost of the computer = purchase cost + repairing expenses + miscellaneous expenses = 10,000 + 1,000
+ 500 = 11,500
Let the sale price be x
Then profit will be 20% of x i.e. 0.2x
Cost of the computer = sale price-profit = x – 0.2x = 0.8x = 11,500 or x = Rs. 14,375
57. Total sales value = 1,00,000
Sales price after discount = 1,00,000 – 5% of 1,00,000 = 1,00,000 – 5,000 = Rs. 95,000
So the amount of the bill drawn will be Rs. 95,000.
58. The Maturity date will be 3 days after 2nd May i.e. 5th May, 2010.
domestic trade transactions, confirmed in particular with an invoice - with right of recourse to you - and
credits you with the amount of the bill of exchange less discount interest and additional costs related to
the bill, accrued in advance from the discount date to the bill payment term.
Amount to be paid to bank on discounting at 12% pa = 50,000 × 12/100 × 3/12 = Rs. 1,500
Thus amount received from bank on discounting = 50,000 – 1,500 = Rs. 48,500
The amount of remittance to B will be = 48,500/2 = Rs. 24,250

1. Drawings A/c is a personal account.

2. Income Tax paid by sole-proprietor from business bank A/c is debited to his Capital A/c.
3. Employees are internal users. All others are external.
4. Recording of transaction in journal is called entry.
5. Narrations are given for each journal entry.
6. Each account debited in journal should be debited in ledger with reference of respective credit account.
7. Basic distinction between capital and revenue expenditure is considered on the basis of nature of business,
purpose of expense and effect on revenue generating capacity.
8. Unintentional Omissions/Commissions are called errors.
9. Treating a revenue expenditure as capital or vice-versa is error of principle.
10. Under Reconciliation Statement, while adjusting cash book, all errors/omissions in cash book are
considered.
11. In ledger, 8 columns are prepared.
12. Transactions are recorded in Chronological order (in order of occurence) in journal.
13. These errors are called compensating errors.
14. If opening inventory is overstated, income for an accounting period will be under-stated.
15. Inventories are valued at lower of cost or NRV.
16. Joint venture A/c shows profit/Loss and is a nominal A/c.
17. Existing goodwill is written back by old partners in old profit/loss ratio.
18. To promote credit sales, Del-credere commission is provided.
19. Normal loss is unavoidable and should be spread over the entire consignment.
20. Co-venturers keep separate set of books of accounts if venture size is big.
21. In the given case, old bill will be cancelled.
22. The periodical statement sent by consignee to consignor is Account Sales.

ANSWERS
23. Dividends payable are dividends that a company’s board of directors has declared to be payable to
its shareholders. Until such time as the company actually pays the shareholders, the cash amount of the
dividend is recorded within a dividends payable account as a current liability.
Equity shares called up = 5,00,000
Calls in arrear = 40,000
Share capital on which dividend is to be paid = 5,00,000 – 40,000 = 4,60,000
Proposed dividend = 15%
Thus amount of dividend payable = 15% of 4,60,000 = Rs. 69,000
So the proportion in which the shares will be allotted = total shares allotted/total shares applications
received = 10,000/14,000 = 5/7
F applied for 420 shares so the total shares allotted to him will be = 420 × 5/7 = 300 shares
So excess application money received from F = (420 – 300) × 2 = Rs. 240
25. Cost of the boxes sent by X = 2,000 × 100 = 2,00,000
Sales price of the boxes sent = 2,00,000 + 45% of 2,00,000 = 2,90,000
The amount of bill drawn by X on Y will be = 60% of 2,90,000 = Rs 1,74,000
26. The wrong casting of purchases in the cash book will only effect the bank balances as in no other
account it has been wrongly posted. As the purchase of Rs. 1870 was recorded as Rs. 1,780 in the
cashbook, the cash book will show the bank balance more than actual by Rs. 90.
27. Cost of purchasing 1,000 pcs of cover files @ Rs. 275 per 100 pc = Rs. 2,750
Sales tax on above = Rs. 137.5
Transport charges = Rs. 50
Thus purchase price per piece = (2,750 + 137.5 + 50)/1,000 = Rs. 2.9375
28. Remuneration paid for services is called commission. Commission is always paid on sales. Extra commission
paid to consignee for timely collection of debs and avoids bad debts is called Del creder commission.
Since delcredere commission is given the consignee will bear the bad debt loss.
Over-riding commission is an extra commission allowed to the consignee in addition to the normal
commission. Such additional commission is generally allowed:
(i) To provide additional incentive to the consignee for the purpose of introducing and creating a
market for a new product

(ii) To provide incentive for supervising the performance of other agents in a particular area
(iii) To provide incentive for ensuring that the goods are sold by the consignee at the highest possible
price.
Thus ordinary commission = 5% of 60,000 = 3,000
Del creder commission = 2% of (30% of 60,000) = 360
Overriding commission = 3% of (60,000 – 50,000) = 300
Total commission = Rs. 3,660
29. Total expenses:
Expense head Amount
Freight 2,000
Godown rent 1,000
Interest on loan taken by A(18% of 50,000 × 1/12) 750
Selling expenses by B 5,000
Interest on loan taken by B(18% of 1,50,000 × 2/12) 4,500
_________
Total Rs. 13,250
_________
30. If noting charges are paid by the bank (if the bill has been discounted) it will be realised by the bank from
the drawer, who will charge it from drawee.
Thus the bank will deduct from Ritesh’s bank balance the amount of the bill plus noting charges.
i.e. 10,000 + 200 = Rs. 10,200
Goods sent out on sale or return basis = 1,20,000
Approval letter received for goods worth Rs. 80,000
Goods still lying with the dealer = 1,20,000 – 80,000 = 40,000
So cost of goods lying with the dealer = 40,000 × 100/125 = Rs. 32,000
32. By profit sharing ratio in a partnership firm, we mean the ratio in which the profits and losses of the firm
are to be distributed amongst the partners.
In the absence of a partnership deed and where there is no indication as to the agreement between the
partners in this aspect, it should be considered as equal share for all partners.
Thus the profits Rs. 1,50,000 will be shared among the partners equally i.e.

ANSWERS
A Rs. 50,000
B Rs. 50,000
C Rs. 50,000
33. The cost of acquisition includes the purchase cost plus any reasonable costs incurred in placing the asset
into a position where it is ready for use.
So the amount debited to car account will be = purchase cost + initial repairs + registration + dealers
commission = 2,00,000 + 25,000 + 5,000 + 2,000 = Rs. 2,32,000
34. Partners are entitled to receive interest at an agreed rate of interest on any Loan given by them to the
firm. Interest on Loan is a charge against profits so a partner is entitled to receive interest whether there
are profits or not. If there is no agreement regarding the rate of interest, it is taken as 6% p.a.
So as nothing is mentioned in the deed of partnership regarding the interest on loan so interest on
Prafful’s loan will be paid at 6% pa.
Interest on Prafful’s loan will be = 6% of 20,000 = Rs. 1,200
35. The cost of the goods sold = 1,60,000
Sale price of the goods sold = 2,40,000
Profit on sale = 2,40,000 – 1,60,000 = 80,000
Profit margin on cost = profit/cost × 100 = (80000/160000) × 100 = 50%
Cost of the goods taken over by B = total goods-goods sold = 2,40,000 – 1,60,000 = 80,000
Amount at which the goods are taken over by B = 80,000 + 50% of 80,000 = Rs. 1,20,000
36. Rs.
Total value per share 9
Application money 2
Allotment money 4
First call 1
Final call (9 – 2 – 4 – 1) 2
37. On the death of a partner, the representatives are entitled to Share of profit upto the date of death.
Thus share in profits for the period 1st April 2010 to 30th June 2010 to be credited to D’s Account will
Profit for the period on the basis of last year’s profit will be 75,000 × 3/12 = Rs. 18,750

38. If the amount of premium on shares forfeited has been received by the company prior to the forfeiture,
securities Premium A/c will not get affected. In this case the journal entry of forfeiture of shares will be
similar to the entry made as if the shares had been issued at par.
The journal entry will be
Share Capital A/c …Dr
To Share forfeited A/c
To Unpaid Calls A/c/Calls in arrears A/c
(Forfeiture of share issued at premium)
In the above question premium was received at the time of allotment and the shares were forfeited for
nonpayment of first and final call thus securities premium account will not get effected and the amount
debited to the same will be Nil.
39. 6% rate is allowed as per Indian Partnership Act.
40. Invoice value of the goods lost = 1/10th of the total invoice value of the goods sent = 25,000
Thus total invoice value of the goods sent = 25,000 × 10 = Rs. 2,50,000
41. The debentures are being issued at a discount thus the value of each debenture will be 100 – 20 = Rs. 80
Total value of machinery purchased = 5,00,000
Number of debentures issued in consideration = total value of machinery purchased/value per debenture
= 5,00,000/80 = 6,250 debentures
debentures account.
42. When the shares forfeited are reissued at discount, Bank account is debited by the amount received and
Share capital account is credited by the paid up amount. The amount of discount allowed is debited to
Share Forfeited Account. This is for adjusting the amount of discount so allowed from the amount
forfeited at the time of forfeiture.
Now the amount of discount allowed on reissue of shares at the most can be equal to the forfeited
amount on such shares. In that case the share forfeited account after reissue will show a zero balance.
But in case, this amount of discount is less than the amount forfeited, the remaining forfeited amount will
be profit for the company. This profit is a capital gain to the company and is transferred to Capital
Reserve account.
In the above question discount per share = Rs. 1
Total discount on the reissued shares = Rs. 2,000
Amount available in shares forfeiture account = Rs. 3,000
The surplus amount to be transferred to capital reserve account = 3,000 – 2,000 = Rs. 1,000

ANSWERS
43. A change from one method of providing depreciation to another should be made only if the adoption of
the new method is required by statute or for compliance with an accounting standard or if it is considered
that the change would result in a more appropriate preparation or presentation of the financial statements
of the enterprise. When a change in the method of depreciation is made, depreciation should be recalculated
in accordance with the new method from the date of the asset coming into use. The deficiency or surplus
arising from the retrospective recomputation of depreciation in accordance with the new method would
be adjusted in the accounts in the year in which the method of depreciation is changed.
The original cost of the machine = Rs. 10000
Depreciation of 2 years charged till now according to straight line method = 10,000 – 6,000 = Rs. 4,000
Rate of depreciation according to WDV method = 20%
Depreciation for the 1st year according to wdv method = 20% of 10,000 = 2,000
WDV as on 31-3-2011 will be = 10,000 – 2,000 = 8,000
Depreciation for the 2nd year = 20% of 8,000 = Rs. 1,600
Total depreciation for 2 years calculated according to wdv method = 2,000 + 1,600 = 3,600
Thus excess depreciation charged till now will be 4,000 – 3,600 = Rs. 400
44. The provision created to cover the next year’s bad debt expense out of the current year’s trade receivables
is known as provision for bad debts. The provision for bad debt is calculated on the trade receivable’
balance obtained after deducting the bad debt written off.
The provision created to cover the expense of discount that may be allowed to the trade receivable
during the coming year when they pay their debt on time. The provision for discount on trade receivable
is calculated on the trade receivable balance after deducting the bad debt and the provision for bad debt
amount.
Thus provision for doubtful debt = 2% of (25,000 – 3,000) = 440
Provision for discount = 1% of (25,000 – 3,000 – 440) = 216
Net trade receivable to be shown in balance sheet = 25,000 – 3,000 – 440 – 216 = Rs. 21,344
45. Share of C = Rs.20, 000 × 2/10
Rs. 20,000 is the difference between policy value and surrender value, to be credited to partners.
46. In the absence of partnership deed No salary is given to any partner for participation in the work of
partnership firm. Thus the claim of Y for getting salary is wrong and will not be allowed. Thus the profit
of the firm will be distributed among the partners in their profit sharing ratio i.e.1:1:1. Amount payable to
X, Y and Z will be 60,000/3 = Rs. 20,000 each.
47. The cost of the damaged TVs = 10,000 × 5 = 50,000
Cost of remaining TVs = 10,000 × 95 = Rs. 9,50,000

Since the cost of damaged TVs were adjusted with the remaining TVs thus the cost of the remaining
TVs will be 9,50,000 + 50,000 = Rs. 10,00,000
So the cost per TV will be = 10,00,000/95 = Rs. 10,526
On the maturity Rs. 30,000 is to be paid to the bank and thus A will send to B half of the total amount i.e.
Rs. 15000.
49. Joint Venture A/c
To coventurers a/c-A-supplies 1,20,000 By coventurers a/c-B_sales 1,50,000
To coventurers a/c-A-repairs 10,000 {100/80 of 120000}
To coventurers a/c-A-printing 10,000
To coventurers a/c-profit 10,000
_______ _______
1,50,000 1,50,000
_______ _______
50. When debentures are issued at a premium , the amount of premium so received is credited in the
debentures premium account.
Thus amount to be transferred to debenture premium account = 5,000 × 10 = Rs. 50,000
51. Capital Redemption Revere is an account to which is credited the nominal value of shares that have been
redeemed insofar as the redemption was not paid for by the proceeds of a new issue of shares and was
not a payment out of capital.
Thus the amount to be credited to the capital redemption reserve account = 10,000 × 10 = Rs. 1,00,000
52. Out of 25,000 shares Archit paid full value of 1,000 shares held by him with allotment. So at the time of
first call money received and debited to bank account will be = (25,000 – 1,000) × 2 = Rs. 48,000
53. Value of furniture as on 1-1-2010 = Rs. 20,000
Book value of the furniture exchanged as on 1-1-2010 = Rs. 1,200
This furniture was sold during the year so depreciation for half year will be charged on it.
Thus depreciation for half year on the furniture exchanged = 10% of 1,200 × 6/12 = Rs. 60
Thus bookvalue of the furniture exchanged after depreciation will be = 1,200 – 60 = Rs. 1140
Thus the value of the new furniture = 1,140 + 500 = Rs. 1,640
Value of old furniture after depreciation will be = (20,000 – 1,200) × 9/10 = 16,920

ANSWERS
The value of new furniture after charging half year depreciation = 1,640 – 1,640 × 10% × 6/12 = 1,558
Thus the total value of furniture shown in the balance sheet will be = 16,920 + 1,558 = Rs. 18,478
54. Direct Credits or Direct Deposits are amounts deposited directly by someone into an account of the
company. The payer rather than the payee in this case initiate the deposit. Direct Credits are useful
where regular receipts are expected from known parties (such as rent, interest on investment, royalties,
etc) who can deposit the money without the involvement of the payee. The deposit may be made through
cash, cheque or a fund transfer.
Bank records the amount received as soon as the transfer through direct credit is made but the business
entity records the amount when it receives intimation by the bank through bank statement or otherwise.
Therefore, the balance as per bank statement may be higher than the balance as per cash book due to
direct credits not yet accounted for by the entity.
The difference needs to be added to the balance of the cash book when taken as the starting point in the
preparation a bank reconciliation.
55. BRS as on 31-3-2012
Balance as per cash book(dr) 1500
Add:
Dividend collected by bank on behalf of ABC ltd 50
Interest allowed by bank 50 + 250
_______
Less:
_______ (100)
_______
Balance as per the pass book 1650
_______
56. If sales return has been wrongly posted to the credit of the purchase return account ,purchase return
account (cr) will be over casted by Rs. 1500 and sales return account (dr) will be under casted by
Rs. 1,500.
57. Cost of goods sold = sales – gross profit margin = x (say)
Thus x = sales – 331/3% of x
x + 100/3% of x = 13,00,000
x + 1/3x = 13,00,000
4/3x = 13,00,000
X = Rs. 9,75,000
Closing inventory = goods available for sale-cost of goods sold = 12,00,000 – 9,75,000 = Rs. 2,25,000

58. Total amount to be paid = Rs. 7,000
Amount paid after discount of 10% on 30-6-2009 = Rs. 1,800
The amount paid before discount will be = 1,800 × 10/9 = Rs. 2,000
Thus amount left to be paid = 7,000 – 2,000 = Rs. 5,000
Amount paid on 30-9-2009 after 5% discount = 2,850
The amount paid before discount = 2,850 × 100/95 = Rs. 3,000
Thus amount left to be paid in final installment without any discount = 5,000 – 3,000 = Rs. 2,000
59. Let the managerial commission be x
Profit before charging managerial commission = Rs. 44,000
Profit after charging managerial commission = 44,000 – x
Managerial commission = x = 10% of profit after charging managerial commission = 10% of (44,000 –
x)
x = 10% of (44,000 – x)
x = 4,400 – x/10
x + x/10 = 4,400
11x/10 = 4,400
Managerial commission = x = 4,400 × 10/11 = Rs. 4,000
60. Recovered bad debt is revenue in nature.

ANSWERS

1. Transactions between owner and business are recorded as per Entity concept.
2. Salary is expense, Account payable is liability, sales is revenue, Trade Receivable is an asset.
3. Annual financial statements pertain to individual business entity.
4. An employee dismissed from job is not a transaction. All other three are transactions.
5. Accounting does not aim to provide details of personal assets and liabilities of owner. All other three are
objectives of accounting.
6. Personal expenses of owners (paid by firm) are called drawings.
7. Purchase Journal records credit purchase of goods dealt in by firm.
8. Trial balance gives the list of balances of all accounts (given in ledger).
9. Dep. is calculated on original cost under SLM.
10. If date of maturity of a bill is a holiday, bill will mature preceding working date.
11. A promissory note is drawn by maker in favour of payee.
12. Consistency requires that same method should be used from one accounting year to next.
13. Left side of an account is Dr. whereas right side is Cr.
14. Every transaction affects at least 2 accounts.
15. All expenses and income accounts appearing in trial balance are Ist of either to Trading or Profit & Loss
A/c.
16. Scrap value means amount realised at end of useful life of asset.
17. Petty cashier works on Imprest system.
18. Proforma invoice is prepared by consignor and sent to consignee to inform him about essential particulars
of goods.
19. Carriage charges paid for new plant should be debited to Plant A/c. If debited to Carriage A/c, now
rectification would affect both A/cs.
20. Amount due to retiring partner on account of goodwill is debited to the continuing partners in their gaining
ratio.
21. Drawings should be recorded at cost price.
22. Concept of substance over form is applied in the given case.

23. Since C acquires 2/10th share from A and 1/10th share from B he acquires his share in the ratio 1/5:1/10
i.e. 2:1
Names Old ratio Sacrifice/gain New ratio
A 3/5 3/10 x 2/3 = 1/5 3/5 – 1/5 = 2/5 = 4/10
B 2/5 3/10 x 1/3 = 1/10 2/5 – 1/10 = 3/10
C 3/10
The new ratio = 4:3:3
Here average profit of last 4 years will be (40,000 + 50,000 + 60,000 + 50,000)/4 = Rs. 50,000
Thus goodwill = 50,000 × 3 = Rs. 1,50,000
25. The shares are being issued at a premium thus the value of each share issued will be 10 + 5 = Rs. 15
Total value of assets acquired = Rs. 75,000
Number of shares issued = total value of shares acquired/value per share
= 75,000/15 = 5,000 shares
of capital they have taken before. The new partner when admitted has to compensate for all these
the firm.
For adjustment of goodwill C’s account will be debited by his share in the firm’s goodwill.
The value of the firms goodwill = Rs. 1,50,000
Share of C in profit = 1/6
Thus C’s account will be debited by 1,50,000 × 1/6 = Rs. 25,000
27. Profit = sales less return – purchase less return
Sales less return = sales – sales return = 40,000 – 5,000 = Rs. 35,000
Purchase less return = purchase – purchase return = 30,000 - 5,000 = Rs. 25,000
Thus amount of profit = 35,000 – 25,000 = Rs. 10,000

ANSWERS
28. Under WDV method, depreciation is charged at a fixed rate every year, on the reducing balance. a
years, as the asset grows older.
Lets find the WDV as on 30-3-2010 of the furniture and fixture in question
Balance of furniture and fixture as on 1-4-2009 = Rs. 10,000
Original cost of furniture purchased on 1-10-2009 = Rs. 5,000
31-3-20 10 depreciation @10%pa on the opening balance = 10,000 × 10% = Rs. 1,000
31-3-2010 depreciation @10%pa on the furniture purchased on 1-10-2009 for half year
= 5,000 × 10% × ½ = Rs. 250
31-3-2010 total depreciation = 1,000 + 250 = Rs. 1,250
29. Cost of goods consigned to Mr. Ramesh = 100 × 100 = Rs. 10,000
Plus freight and carriage = Rs. 1,000
Total cost of 100 cases consigned = Rs. 11,000
Abnormal loss i.e. goods lost in transit = 11,000 × 10/100 = Rs. 1,100
time of forfeiture.
(iii) Credit ‘Unpaid Calls A/c’ with the amount due on forfeited shares. This cancels the effect of debit
to such calls which take place when the amount is made due.
Forfeited shares account will be credited by the amount which has been received in respect of forfeited
shares.
Thus the amount received on such shares = 1,000 × 3.5 = Rs. 3,500
The shares forfeited account will be credited by Rs. 3,500
31. The debentures are being issued at a premium thus the value of each debenture will be 1,000 + 20% of
1,000 = 1,200
Total value of asset purchased = Rs. 60,00,000
Number of debentures issued in consideration = total value of asset purchased/value per debenture
= 60,00,000/1,200 = 5,000 debentures

32. Discount 4% of Rs. 1,00,00,000 = Rs. 4,00,000
Premium on repayment 6% of Rs. 1,00,00,000 = Rs. 6,00,000
Total loss on issue of debentures = 4,00,000 + 6,00,000 = Rs. 10,00,000
33. The retiring partner is entitled to his/her share of goodwill at the time of retirement because the goodwill
is the result of the efforts of all partners including the retiring one in the past. The retiring partner is
compensated for his/her share of goodwill. Therefore, in case of retirement of a partner, the goodwill is
adjusted through partner’s capital accounts. The retiring partner’s capital account is credited with. His/
her share of goodwill and remaining partner’s capital account is debited in their gaining ratio.
Share of Om in goodwill = 5/10 of 50,000 = Rs. 25,000
Gaining ratio
Partners Old ratio New ratio Gaining ratio
Jai 3/10 1/2 ½ – 3/10 = 2/10
Jagdish 2/10 1/2 ½ – 2/10 = 3/10
Thus Jai’s account will be debited by = 25,000 × 2/5 = Rs. 10,000
And Jagdish’s account will be debited by = 25,000 × 3/5 = Rs. 15,000
34. In case of Sudeten declaration of govt. holiday, the bill will mature on the next working day.
35. Cost of machinery as on 1st april 2007 = Rs. 1,00,000
Depreciation for 2 years = (10% of 1,00,000) × 2 = Rs. 20,000
Depreciation for half year till 30th sept 2009 = 10,000/2 = Rs. 5,000
Thus WDV as on 30th sept 2009 = 1,00,000 – 20,000 – 5,000 = Rs. 75,000
Sales consideration of the machine = Rs. 89,000
Thus profit on sale = 89,000 – 75,000 = Rs. 14,000
36. FIFO stands for first-in, first-out, meaning that the oldest inventory items are recorded as sold first but do
not necessarily mean that the exact oldest physical object has been tracked and sold.
Closing inventory = 700 units
Since FIFO is followed the closing inventory 700 units will include the purchases made on Jan 30 and Jan
25th
Value of the closing inventory = 400 units @ Rs.10 + 300 units @ Rs. 9 = 4,000 + 2,700 = Rs. 6,700
37. In the books of Sen there is bills payable(dr.) in favour of Mohan of Rs. 5,000 and there is bills receivable(cr.)
of Rs. 5,000 accepted by Tania.

ANSWERS
So when promissory note in favour of Mohan was settled by Sen by sending him Tania’s acceptance the
journal entry will be-
Bill receivable Dr. Rs. 5,000
To Bills payable Rs. 5,000
38. Trail balance is the statement for all ledger balances. And it is used to measure the arithmetical accuracy
of balances... here if trail balance is not equal then we have debit or credit side whichever is short with
suspense account. If the mistake is detected before the preparation of the final accounts, the rectifying
entry is passed.
Here purchase day book was under casted so the necessary entry will be:
Purchases A/c Dr. Rs. 500
To Suspense A/c Rs. 500
39. BRS as on 31-3-2010
Balance as per cash book(dr.) 10000
Add:
_______ 4000
_______
Less:
_______ (3000)
_______
Balance as per the pass book (cr.) 11000
_______
If purchase journal is totaled short, it bill have effect on the trail balance.
40. Total of purchase journal, if cast short by Rs.1, 000, will affect trial balance. All other errors will not
affect.
Total amount of the bill = Rs. 10,000
Interest for 2 months @ 12% pa = 6,000 × 12/100 × 2/12 = Rs. 120
42. Calculation of depreciation
Machine Furniture
1.1.2010 cost 10,000 1.1.2010 cost 20,000

31.3.2010 depreciation 10% of 10,000 31.3.2010 depreciation 5% of 20,000
× 3/12 = 250 × 3/12 = 250
Total depreciation for the year ended 31.3.2010 will be 250 + 250 = Rs. 500
43. Accrued interest receivable occurs when interest on an outstanding receivable has been earned by the
company, but has not yet been received. Here interest from February to March is earned by the company
but received in April.
So the amount of accrued interest will be = 12% of 10,000 × 2/12 = Rs. 200
44. Cost of goods sent on consignment = Rs. 4,80,000
Invoice price = 125% of the cost price
Thus invoice price = 125% of 4,80,000 = Rs. 6,00,000
And the loading = invoice price – cost price = 6,00,000 – 4,80,000 = Rs. 1,20,000
45. Remuneration paid for services is called commission. Commission is always paid on sales.
Here B is entitled to commission of Rs. 500 per unit
Here total units sold by B = 150 units on credit + 75 units for cash = 225 units
Thus the amount of commission will be = 225 × 500 = Rs. 1,12,500
46. A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a
new entity and new assets by contributing equity. They exercise control over the enterprise and
consequently share revenues, expenses and assets.
Joint venture A/C
To coventurers a/c-purchases 75,000 By coventurers a/c-sales 90,000
To coventurers a/c-expenses 10,950 By coventurers a/c-
To coventurers a/c-profit 6,750 Ram-drawings 2,700
_______ _______
92,700 92,700
_______ _______
Total amount of the bill = Rs. 10,000
Interest for 3 months @ 15%pa = 6,000 × 15/100 × 3/12 = Rs. 225

ANSWERS
48. The maturity date will be 25th January, 2010 (after 1 month).
Here amount of the bill = Rs. 20,000
The bill was accepted by Renu on 1st January but was discounted on 4th February so,
Amount to be paid to bank on discounting at 15%pa = 20,000 × 15/100 × 2/12 = Rs. 500
50. When a new partner is admitted he/she acquires his/her share in profit from the existing partners.
At the time of admission of a partner, existing partners have to surrender some of their share in favour of
the new partner. The ratio in which they agree to sacrifice their share of profits in favour of incoming
partner is called sacrificing ratio. Some amount is paid to the existing partners for their sacrifice. The
amount of compensation is paid by the new partner to the existing partner for acquiring the share of profit
which they have surrendered in the favour of the new partner.
Sacrificing Ratio is calculated as follows:
Sacrificing Ratio = Existing Ratio – New Ratio
Old ratio New ratio Sacrificing ratio
X 2/3 2/3 of ¾ = 1/2 2/3 – 1/2 = 1/6
Y 1/3 1/3 of ¾ = 1/4 1/3 – 1/4 = 1/12
Z’s share in profit = 1/4 of 76,000 = Rs. 19000 which is less than Rs. 25,000 i.e. the guaranteed amount
So Z’s share = Rs. 25,000
So remaining 76,000 – 25,000 = Rs. 51,000 will be distributed among X and Y in the ratio 2:1
X’s share = 51,000 × 2/3 = Rs. 34,000
And Y’s share = 51,000 × 1/3 = Rs. 17,000
51. When the value of goodwill is not given in the question then hidden goodwill is calculated with reference
to the total capital of the firm and the profit sharing ratio.
Hidden goodwill is that goodwill the amount of which is not mentioned in the deed, but the amount of
This method is generally used when the new partner is unable to bring in his share of goodwill which is at
the same time unknown. So to calculate the value of this hidden goodwill we will follow these steps:
1. First, we will multiply the capital brought by the new partner with his reciprocated ratio.
2. Secondly, we total up the actual capitals of all the partners including the capital brought by the new
partner as well.
3. Then we deduct the total of actual capitals of all the partners from the assumed capital.

Assumed capital = 8,00,000 × 4 = Rs. 32,00,000
Actual capital = Dheeraj’s capital + Gopal’s capital + profit as on the date of admission + Deepak’s
capital = 5,00,000 + 5,00,000 + 4,00,000 + 8,00,000 = Rs. 22,00,000
Hidden goodwill = 32,00,000 – 22,00,000 = Rs. 10,00,000
52. Cash book is a financial journal that contains all cash receipts and payments, including bank deposits and
withdrawals. In the cash book only the transactions which are either received or paid in cash/bank are
recorded thus rent due but not received will not be recorded in the cash book.
53. Loss on redemption of debenture will be equal to the premium of 20% at which the debentures are
redeemable after 5 years
Thus loss on redemption of debentures will be = 20% of 2,00,000 = Rs. 40,000
54. In case applications are received for more debentures than issued, it is known as over subscription.
Application money received on over applied shares are returned by the company. Thus the amount to be
credited to the debentures account will be the value of the debentures actually issued
Here the amount to be credited to the debentures account will be = 10,000 × 100 = Rs. 10,00,000
55. Total value of the redeemable preference shares to be redeemed = 9,000 × 10 = Rs. 90,000
Thus value of equity shares of Rs. 10 each to be issued = Rs. 90,000
The number of equity shares to be issued = 90,000/9 = 10,000 shares
56. Last-In, First-Out is one of the common techniques used in the valuation of inventory on hand at the end
of a period and the cost of goods sold during the period. LIFO assumes that goods which made their way
to inventory (after purchase, manufacture etc.) later are sold first and those which are manufactured or
acquired early are sold last. Thus LIFO assigns the cost of newer inventory to cost of goods sold and
cost of older inventory to ending inventory account. This method is exactly opposite to first-in, first-out
method.
Since the firm is following LIFO method for valuation of inventory the closing inventory i.e.
15,000 units + 20,000 units – 30,000 units = 5,000 units will be valued @ of the opening inventory
Per unit value of the opening inventory = 1,50,000/15,000 = Rs. 10
Thus the value of the closing inventory will be = 5,000 × 10 = Rs. 50,000
57. Cost of acquisition includes the purchase cost plus any reasonable costs incurred in placing the asset into
a position where it is ready for use.
So the amount debited to machinery account will be = purchase cost + shipping forwarding + import duty
+ carriage inwards + repair charges + installation charges + brokerage + iron pad
= 50,000 + 2,000 + 1,000 + 1,000 + 500 + 200 + 400 + 100 = Rs. 55,200
58. Interest on capital allowed = 12%
Capital invested = Rs. 1,00,000
Thus interest to be charged to P&L = 12% of 1,00,000 = Rs. 12,000

ANSWERS

1. Assets should be recorded at price paid to acquire them on the basis of cost concept.
2. Cash book is in ledger form.
3. Adjusted cash book balance is considered for finalizing the accounts.
4. Material cost for erection of machinery and wages paid for it should be debited to Machinery A/c.
5. Diff. of totals of Dr. and Cr. Side of trial balance is B/F of to Suspense A/c.
6. Inventories should be issued in the sequence in which they are purchased on the basis of FIFO.
7. Value of an asset after deducting dep. is called Book Value.
8. Expenses incurred to retain title of building are revenue.
9. Carriage inward is debited to Trading A/c.
10. 93 days after 26.02.10 will be 30.05.2010 (Maturity date).
11. Balancing figure is placed on Cr. Side of the ledger account if total of Dr. is more than total of Cr. Side.
12. Cost of small calculator is accounted as expense due to Materiality concept.
13. Base stock is minimum quantity of inventory held as precaution.
14. M/s Surendran & Co. or bearer will be the payee in the given case.
15. Flucating Capital account is credited with interest on capital, profits of year and salaries of partners.
16. If incoming partner brings any additional amount other than capital, it is premium for goodwill.
17. Memorandum joint venture A/c is prepared when each co-venturer keeps records of all their own joint
venture transactions.
18. In case del-credere commission provided by consignor to consignee, bad debts will be borne by consignee.
19. Sending party is consignor.
20. Discounting of bill is done with bank.
21. WDV method has been adopted in the given case.
22. The given transactions are in nature of consignment.

23. Capital contribution is an amount of money or assets given to a business or partnership by the owners or
partners. The capital contribution increases the owner or partner’s equity interest in the entity. here the
partners will contribute capital in their agreed profit sharing ratio i.e. 5 : 3 : 2
Ajay’s contribution = 6,00,000 × 5/10 = Rs. 3,00,000
Vijay’s contribution = 6,00,000 × 3/10 = Rs. 1,80,000
Sanjay’s contribution = 6,00,000 × 2/10 = Rs. 1,20,000
24. The demand for the shares is less than the number of shares issued by the company. Allotment of equity
shares will be on the basis of shares subscribed by the public and not on the shares issued to the public for
subscription.
Thus number of shares to be issued to the public will be 40,000 shares.
25. By issuing debentures means issue of a certificate by the company under its seal which is an
acknowledgment of debt taken by the company.
When Debentures are issued for cash at par :
Following journal entries will be made :
(i) Application money is received
Bank A/c Dr
To Debentures Application A/c
(Application money received for Debentures)
(2) Transfer of debentures application money to debentures account on their allotment
Debentures Application A/c Dr
To Debentures A/c
(Application money transferred to debenture account on allotment)
Here the total amount is received with application so the amount to be transferred to the 10% Debenture
account will be (5,000 × 100) = Rs. 5,00,000
26. Capital Redemption Revere is created when a company buys it owns shares which reduce its share
capital.
Suppose, the fresh equity shares or preference shares are issued to redeem the old preference shares, in
this case the difference between the face value of preference shares and fresh shares issued will be
transferred to capital redemption reserve account.
Here the face value of preference shares redeemed = Rs. 1,00,000
And the face value of fresh shares issued = Rs. 50,000
Thus amount to be transferred to capital redemption reserve = 1,00,000 – 50,000 = Rs. 50,000

ANSWERS
Interest from 1-6-2010 to 30-9-2009 i.e. for 4 months from the date of issue of debentures = 9% of
4,00,000 × 4/12 = 12,000
Interest from 1-10-2009 to 31-3-2010 = 9% of 4,00,000 × 6/12 = 18,000
Total interest to be debited to profit and loss for the year ended 31-3-2010 will be = 12,000 + 18,000 = Rs.
30,000
28. If any amount has been called by the company either as allotment or call money and a shareholder has
not paid that money, this is known as calls in arrears.
If any call has been made but while paying that call, some shareholders paid the amount of the rest of
calls also, then such amount will be called as calls in advance.
Calls in advance and calls an arrears are not entitled for any dividend declared by the company.
Thus the dividend payable by the company will be 20% of called up capital-calls in arrear which is
Rs. 3,00,000 – Rs. 15,000.
Dividend payable = 20% of 2,85,000 = Rs. 57,000.
Reserve account.
In the above question discount per share = 10 – 9 = Rs 1
Total discount on the 1800 reissued shares = Rs. 1,800
Proportionate Amount available in shares forfeiture account for 1800 shares reissued = Rs. 5,000 ×
1,800/3,000 = Rs. 3,000

So the proportion in which the shares will be allted = total shares allotted/total shares applications received
= 10,000/12,000 = 5/6
Total shares held by Kittu = 1,000
Thus total shares applied by Kittu = 1,000 × 6/5 = 1,200
So excess application money received from Kittu = (1,200 – 1,000) × 2 = Rs. 400
Total allotment money due from Kittu = 1,000 × 3 = Rs. 3,000
Allotment money adjusted with excess application money = Rs. 400
So her calls in arrear was = 3,000 – 400 = Rs. 2,600
31. Life policy is the Insurance taken by a partnership. Most often, this insurance is purchased to aid
the business in continuing to operate in case of the death or dismemberment of one partner.
the total amount of the policies taken by the firm is = 50,000 + 1,00,000 + 1,50,000 = Rs. 3,00,000
the share of the partners in the total policy will be in their profit sharing ratio
thus share of Me in the policy will be = 3,00,000 × 2/10 = Rs. 60,000
32. In case of retirement and death, goodwill is adjusted through the partners’ account in Gaining Ratio .
The Journal entry for adjusting goodwill is:
Remaining or Continuing Partners’ Capital Account Dr.
To Retiring or Deceased Partner’s Capital Account
(Goodwill adjusted in the gaining ratio)
Calculation of gaining ratio
Vijay 3/6
Vineet 2/6 2/3 2/3-2/6 = 2/6
Vivek 1/6 1/3 1/3-1/6 = 1/6
So the gaining ratio Vineet and Vivek is 2 : 1
Vijay’s share in goodwill = 3/6 of 18,000 = Rs. 9,000
Thus Vijay’s share of goodwill debited to Vineet capital account = 2/3 of 9,000 = Rs. 6,000
Vijay’s share of goodwill debited to Vivek’s capital account = 1/3 of 9,000 = Rs. 3,000

ANSWERS
33. Calculation of new profit sharing ratio

Partners Old ratio Gain New ratio
Amit 5/12 3/12 × 4/7 = 1/7 5/12 + 1/7 = 47/84
Rohit 4/12 3/12 × 3/7 = 3/28 4/12 + 3/28 = 148/336 = 37/84
Sumit 3/12
Thus the new ratio between Amit and Rohit = 47:37
Partners Old ratio Gain/(sacrifice) New ratio
Rachna 1/2 1/3 × 1/2 = (1/6) 1/2-1/6 = 2/6 = 1/3
Sapna 1/2 1/3 × 1/2 = (1/6) 1/2-1/6 = 2/6 = 1/3
Ashna 1/3 1/3
Thus the new ratio between Rachna,Sapna and Ashna = 1 : 1 : 1
35. Under this method we calculate the average profits and then assess the capital needed for earning such
average profits on the basis of normal rate of return, such capital is called capitalized value of average
profits. After arriving at the capitalized average profit, Capital employed (assets-liabilities) of the firm is
then subtracted from the capitalized value of average profits to arrive at the Goodwill. To calculate
goodwill using average profit, the average net profit for a given number of past years are multiplied by an
agreed number of years.
Mathematically, Capitalized Value of Average Profits = Average Profits × (100/Normal Rate of Return)
Goodwill = Capitalized Value of Average Profits – Capital Employed.
Here profit for the year = 12,00,000
Reasonable rate of return = 15%
Thus capitalized value of profit = 12,00,000 × 100/15 = 80,00,000
Capital employed = 80,00,000
Thus Goodwill = 80,00,000-80,00,000 = NIL
On the closing date the cost of goods lying with customers is Rs. 6,000 which is less than the market
value which is Rs. 12,000, so the cost of goods lying with customers will be Rs. 6,000.
37. On maturity date, Disha will send Rs. 3,000 (Rs. 6,000/2).
38. When a person or party is declared by court as insolvent or bankrupt he is considered to be unable to pay
his liabilities. It means, the bills accepted by him will be naturally dishonored. Therefore, when it is known

that a person has become insolvent, entry for the dishonor of the bill of exchange should be passed both
in the books of the drawer and acceptor.
Later on something may be received from his estate. When the amount has been received cash account
will be debited and the personal account of the person will be credited.
Here 30 p per rupee has been recovered . Thus amount recovered will be 30% of 10,000 = Rs. 3,000
And the amount of bad debt will be = 10,000 – 3,000 = Rs. 7,000
39. Joint venture a/c
To coventurers a/c-Ram- By coventurers a/c-Shyam_sales 25,000
purchases 20,000 By Coventureres-shyam-drawings 2,000
To coventurers a/c-Ram-freight 1,000
To coventurers a/c-shyam-carriage 500
To coventurers a/c-profit 5,500
______ ______
27,000
______ 27,000
______
Amount to be paid to Ram by Shyam = cost of goods purchased + expenses incurred by Ram + share in
profit on venture = 20,000 + 1,000 + 2,750 = Rs. 23,750
40. Cost price means original cost of the unsold inventory plus proportionate amount of the expenses which
are necessary to put the goods. In their present value place and condition such as freight, octroi duty,
insurance, forwarding charges, carriage up to consignee’s godown etc. Generally all expenses incurred
till the goods reach consignee’s godown etc. Generally all expenses incurred till the goods reach consignee’s
godown etc are treated as part of the cost whether incurred by the consignee or consignor. Expenses
incurred in storage and selling the goods after the goods reach consignee’s godown are not to be considered
in the cost of the unsold stock (closing stock).
So in the present case the expenses which are to be excluded will be
Godown charges = Rs. 600
Selling expenses = Rs. 1,200
Total = Rs. 1,800
41. Holder of debentures issued as collated security is entitled to interest on amount of loan only.
42. Gross profit is a company’s revenue minus its cost of goods sold. Gross profit is a company’s residual
profit after selling a product or service and deducting the cost associated with its production and sale.
Cost of goods sold is the direct costs attributable to the production or purchase of the goods sold by a
company. It excludes indirect expenses such as distribution costs.

ANSWERS
Cost of goods sold in the above case = opening stock + purchases + carriage-closing stock = 20,000 +
1,00,000 + 2,000 – 25,000 = 97,000
Gross profit = sales – cost of goods sold = 1,50,000 – 97,000 = Rs. 53,000
43. A suspense account is an account in the general ledger in which amounts are temporarily recorded. The
suspense account is used because the proper account could not be determined at the time that the
transaction was recorded.
When the proper account is determined, the amount will be moved from the suspense account to the
proper account.
(1) When return inward was undercast dr side of trial balance must be showing Rs. 150 less,thus
suspense account would have been debited
(2) When return outward book was overcasted then also debit balance of the trial balance must be
showing Rs. 1,000 less so suspense account would have been debited
(3) When salaries was posted twice the credit side of the trial balance must be showing Rs. 1,500 less
and so suspense account would have been credited
Thus the balance of suspense account would be showing 1,500 (Cr) – 1,000 (Dr) – 150 (Dr) = 350 (Cr)
44. Trial balance
Partculars LF Amount Amount
Capital 4,00,000
Computer 25,000
Air conditioner and furniture 1,00,000
Fixed Deposits 2,00,000
Salaries 8,00,000
Fee received 12,00,000
Travelling expenses 1,50,000
Rent and office expenses 2,40,000
Cash balances 1,80,000
Bank overdraft _______ 95,000
_______
Total 16,95,000
_______ 16,95,000
_______
45. Historical cost is a measure of value used in accounting in which the price of an asset on the balance
sheet is based on its nominal or original cost when acquired by the company.
Here the historical cost of the closing inventory will be = 1,000 × 3.25 = Rs. 3,250
And the selling cost per unit = Rs. 4.25

So the selling price of the closing inventory will be = 1,000 × 4.25 = Rs. 4,250
46. Under the units-of-production method, useful life of the asset is expressed in terms of the total number of
units expected to be produced:
Cost of Fixed Asset – Residual Value

Annual Depreciation Expense = × Actual Production
Estimated Total Production
Years Actual production Depreciation = (11,00,000/30,00,000) ×

actual production
1-3 year 5 lacs units 5,00,000 × 11/30 = 1,83,333
4-6 year 3 lacs units 3,00,000 × 11/30 = 11,000
7-10 year 1.5 lacs units 1,50,000 × 11/30 = 55,000
Thus Annual depreciation for 1-3 year, using production units method will be Rs. 1,83,333.
47. Bank reconciliation statement as on …
Balance as per cash book (cr) (2,000)
Add:
Cheques issued but not presented for payment 200 + 150 + 175 525
Less:
_______
Balance as per pass book (Dr) (2,075)
_______
48. Statement showing the value of physical inventory as on 31.3.2012
Particulars Rs. Rs.
Inventory as on 31.3.2012 2,80,000
Less inventory on consignment (1,20,000)
Less goods damaged 25,000 – 5,000 (20,000)
_______
Value of inventory as on 31.3.2012 1,40,000
_______

ANSWERS
Thus depreciation to be charged = lease value × the annuity = 1,00,000 × 0.282012 = Rs. 28,201
50. Outstanding interest means the interest which is accrued but not received during the current period.
Here the total interest due on 18% investment = 18% of 1,00,000 = Rs. 18,000
And the interest received = Rs. 15,000
Thus interest outstanding = 18,000 – 15,000 = Rs. 3000
51. Hypothecation is an established practice of a borrower pledging an asset as collateral for a loan, while
retaining ownership of the assets and enjoying the benefits therefrom. With hypothecation, the lender has
the right to seize the asset if the borrower cannot service the loan as stipulated by the terms in the loan
agreement.
Here the bank has allowed the customer to overdraw 80% of the hypothecated value
And the hypothecation of stock has been done by the bank at 80% of the original closing stock value.
Let the closing stock be x (say)
Then the hypothecated value of stock will be 80% of x
And the customer can withdraw 80% of (80% of x) = Rs. 1,60,000
Or 0.64 x = 1,60,000
Or x = Rs. 2,50,000 which is the closing stock.
52. Manager’s commission is calculated in two ways
1. On Profits before charging such commission:
Manager’s commission = Net Profits X (Percentage of commission / 100)
2. On Profits after charching such commission:
Manager’s commission = Net Profits X (Percentage of commission / 100 + % of commission)
Here the managers commission is 20% of net profit before charging such commission
So the managers commission will be = 1,20,000 × (20/100) = Rs. 24,000
53. Depreciation on an asset will be charged on that part only which is being used for business purposes and
not for personal use.
Here out of four floors of the building 1 is used for residential purposes and 3 floors are used for official
purposes. Thus depreciation in the business books will be charged on only 3 floors.
Total depreciation = 80,000
Depreciation to be charged in the business books = 80,000 × 3/4 = Rs. 60,000

54. Statement showing the value of closing inventory as on 31.3.2012
Particulars Rs. Rs.
Inventory as on 7.4.2012 1,80,000
Add sales during the period Sales-gross profit (20% on sales)
= (80/100) × 2,50,000 2,00,000
Less purchases during the period 1,50,000 (1,50,000)
Value of inventory as on 31.3.2012 2,30,000
Total application money received with application = 12,000 × 100 = Rs. 12,00,000
Nunber of debentures issued = 10,000
Amount received in excess to be refunded = 12,00,000 – 10,00,000 = Rs. 2,00,000
55. Discount Rs. 1,40,00,000 × .06 = Rs. 8,40,000
Premium on redemption Rs. 1,40,00,000 × .05 = Rs. 7, 00,000
Total Loss = Rs. 15,40,000
56. Rs. 12,000 × 90 – 10,000 × 90
Rs. 10,80,000 – 9,00,000 = Rs. 1,80,000
57. Capital Redemption Revere is an account to which is credited the nominal value of shares that have been
redeemed insofar as the redemption was not paid for by the proceeds of a new issue of shares and was
not a payment out of capital.
Since here all the shares redeemed was paid for by the proceeds of nea issue of equity shares thus
amount to be transferred to the capital redemption reserve = nil
clearance of his own debts. A bill of exchange is a “negotiable instrument” i.e. a document which is
transferable by delivery without notice to the party liable (drawee).
Amount due to Dinesh = 10,500
Amount settled by bill endorsement = 10,000
Discount = Rs. 500
Entry to be passed =
Dinesh A/c Dr. 10,500
To Bills receivable 10,000
To Discount received 500
The benefit of Rs. 500 earned by Ritesh was Credited to discount received account by Rs. 500.

ANSWERS
59. Share forfeiture is the process by which the directors of a company cancel the power of shareholder if
he does not pay his call money when the company demands for it. Company will give 14 days’ notice;
after 14 days if shareholder did not pay then company will forfeit his shares and cut off his name from the
register of shareholder. Company will not pay his received funds from shareholder.
On non-receipt of the first call and final call money from Rahul, calls in arrear account was debited and
there was no money lying in the first call account or the final call account . Thus when the amount was
forfeited no amount will be credited in the first call account.
60. Shares issued to promoters will be debited to Goodwill A/c.

1. Going concern concept assumes that the business will continue for long and will not liquidate in near
future.
2. Capital is equal to assets less liabilities.
3. Double column cash book records all cash and bank transactions.
4. Errors of commission donot permit trail balance to agree.
5. Wages, Trade receivable, goodwill all have Dr. balance. Bills payable (liability) has Cr balance.
6. ‘Depletion’ is used for natural resources.
7. A bill of exchange requires acceptance.
8. A promissory note cannot be made payable to bearer.
9. Expenditure for replacement of a part is revenue expenditure in the given case.
10. Outstanding salry is personal account as it is due to some person.
11. Drawings are deducted from capital balance.
12. Opening inventory is debited to Trading A/c.
13. Purchase returns are deducted from purchases.
14. Drawings will show a Dr. balance.
15. Purchase of fixed asset (on credit basis) is recorded in Journal Proper.
16. Recording of transactions and events is Accounting.
17. The ratio of sacrifice is same as old profit sharing ratio, unless otherwise agreed.
18. Continuing partners acquire the outgoing partner’s share in gaining ratio.
19. Bill of exchange is called Bill payable by one who is liable to pay.
20. Calls in arrear is deducted from called up capital to arrive at paid up.
21. In the given case, sale will be treated at time of delivery only.
22. Cost concept has been followed in the given case.
23. A Bank reconciliation is a process that explains the difference between the bank balance shown in an
organisation’s bank statement, as supplied by the bank, and the corresponding amount shown in the
organization’s own accounting records at a particular point in time.

ANSWERS
Such differences may occur, for example, because a cheque or a list of cheques issued by the organization
has not been presented to the bank, a banking transaction, such as a credit received, or a charge made by
the bank, has not yet been recorded in the organisation’s books, or either the bank or the organization
itself has made an error.
Bank reconciliation statement as on 31st March 2012
Balance as per cash book(dr) 1,00,000
Less:
_______ 10,000
_______
Balance as per pass book(cr) 90,000
_______
company. It excludes indirect expenses such as distribution costs and sales force cost.
Cost of goods sold in the above case = opening stock + purchases + carriage-closing stock = 1,00,000
Gross profit = sales-cost of goods sold = 1,25,000 – 1,00,000 = Rs. 25,000
consequently share revenues, expenses and assets. Profit on joint venture can be calculated in the
following account
Joint venture a/c
To coventurers a/c-X-purchases 20,000 By coventurers a/c-X-sales 22,000
To coventurers a/c-Y-purchases 40,000 By coventurers a/c-Y-sales 39,000
To coventurers a/c-Y-expense 5,000 By coventureres-Y-drawings 2,000
_______ By coventurers a/c-loss 2,000

_______
65,000
_______ 65,000
_______
The amount of proceeds sent to Sohan will be:
Total bill amount = Rs. 2,000

Less:6% of 2,000 × 3/12 = 30
Amount received from bank by Mohan = 2,000 – 30 = 1,970
Amount sent to Sohan = 1/2 of 1,970 = Rs. 985
27. Sale or return basis is an arrangement by which a retailer pays only for goods sold, returning those that
are unsold to the wholesaler or manufacturer. The customer do not pay for the goods until they confirm
to buy. If they do not buy, those goods will return to us.
Goods on the ‘sale or return’ basis will not be treated as normal sales and should be included in the closing
inventory unless the sales have been confirmed by customer.
Here as No confirmation has been received from Annu Ltd. till 31st March, 2012. So the goods will be
included in the closing inventory at cost or market price whichever is lower. Here it will be included on
cost i.e. Rs. 10,000.
28. Interest on capital will be provided as per the partnership deed . since the books were closed before
providing for the same rectification entry will be passed.
Profit before interest proportioned to the partners as they are EQUAL PARTNERS are:
Somesh = 6,000 × 1/2 = Rs. 3,000
Ramesh = 6,000 × 1/2 = Rs. 3,000
The interest to be provided on capital = 5% of 1,20,000 = Rs. 6,000
Interest to be proportioned to the partners in the ratio of their capital i.e. 1:2. Thus:
Somesh’s share = 1/3 × 6,000 = Rs. 2,000
Ramesh’s share = 2/3 × 6,000 = Rs. 4,000
Thus for rectification Somesh’s account will be debited by Rs 1,000.
Partners Old ratio New ratio
A 3/6 = 1/2 (1-2/6) × 3/5 = 2/5 × 30 = 12
B 2/6 = 1/3 (1-2/6) × 2/5 = 4/15 × 30 = 8
C 1/6 1/6 × 30 = 5
D 1/6 × 30 = 5
Since C is retaining his old share in profit the remaining (1-1/6-1/6) will be shared by A and B in their
mutual profit sharing ratio i.e. 3:2. Thus the new ratio between A, B, C and D = 12:8:5:5
30. Owner of enterprise pays interest on drawings due to entity concept.

ANSWERS
Capitalisation of Average Profits Method:
Under this method we calculate the average profits and then assess the capital needed for earning such
average profits on the basis of normal rate of return. Such capital is called capitalised value of average
profits. The formula is:
Capitalised Value of Average Profits = Average Profits × (100 / Normal Rate of Return)
Capital Employed = Assets – Liabilities
Goodwill = Capitalised Value of Average Profits – Capital Employed
Here capitalized value of average profits = 1,10,000 × 1,000/10 = 11,00,000
Capital employed = 11,00,000 – 1,00,000 = 10,00,000
And goodwill = 11,00,000 – 10,00,000 = Rs. 1,00,000
32. Value of inventory as on 31st March 2012:
Cost of inventory as on 10th April 1,20,000
Add:
Cost of goods sold between 1st April and 10th April 10,000
Purchase returns between 1st April and 10th April 1,000
_______ 11,000
Less:
Cost of goods purchased between 1st April and 10th April 10,000 (10,000)
_______
Value of inventory as on 31st March 2012 1,21,000
_______
33. Inventory must be recorded at the lower of cost or net realizable value.
Cost includes the purchase cost and any other costs necessary in bring the inventories to their present
location and condition. These may include costs incurred directly in the production of inventory such as
direct labor and production overheads (i.e. conversion costs) and other expenses such as transportation
and handling charges, taxes and duties that may not be recoverable from tax authorities. However, costs
do not include general and administrative costs which cannot reasonable attributed to the cost of inventory.
Similarly, selling and distribution expenses, storage costs and excessive expenditure resulting from abnormal
wastage shall not be included in the cost of inventory.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale. This is simply the expected
revenue from the sale of inventory after deducting any further costs that are necessary in order to sell the
inventory.

Value of inventory item by item:
Item No. Units Cost per unit Realization Value at which Value
value per unit recorded = recorded
(NRV) lower of cost
or NRV
1 2 10 11 10 20
2 10 5 4 4 40
3 2 2 2 2 4
Value of closing inventory 64
34. Average Profits Method:
Under this method goodwill is calculated on the basis of the average of some agreed number of past
years. The average is then multiplied by the agreed number of years. This is the simplest and the most
commonly used method of the valuation of goodwill.
(a) Any abnormal profits should be deducted from the net profits of that year.
(b) Any abnormal loss should be added back to the net profits of that year.
(c) Non operating incomes e.g. Income from investments etc should be deducted from the net profits
of that year.
Profit of the year 2010: profit less abnormal gain = 40,000 – 5,000 = Rs. 35,000
Profit for the year 2011: profit add abnormal loss = 50,000 + 10,000 = Rs. 60,000
Average profit of last 2 years = (35,000 + 60,000)/2 = Rs. 47,500
Goodwill = 47,500 × 1 = Rs. 47,500
Here amount of the bill = 1,00,000
The bill was accepted by Hari on 1st January and was discounted on 4th january so,
Amount to be paid to bank on discounting at 12%pa = 1,00,000 × 12/100 × 3/12 = Rs. 3,000

ANSWERS
36. Capital as on 31st December 2011:

Opening capital as on 1st Jan 2011 45,000
Add profit during the year 15,000
Add interest on capital 2,000
Less drawings during the year (14,000)
Less interest on drawings (5,000)
_______
st
Closing capital as on 31 Dec 2011 43,000
_______
37. Since any amount paid for the personal expenses for the proprietor from the firm will be treated as
drawings, the amount Rs. 10,000 paid for personal income tax of the proprietor will be treated as drawings
and will be deducted from his capital.
38. The provision created to cover the next year’s bad debt expense out of the current year’s accounts
receivables is known as provision for bad debts. The provision for bad debt is calculated on the accounts
receivable’ balance obtained after deducting the bad debt written off.
Calculation of additional provision required:
Amount of new provision for doubtful debt required 20,000
Less: Opening balance of provision of doubtful debt (15,000 – 10,000)
Additional provision to be debited to P&L account 15,000
39. While recording salaries the amount of PF will be deducted from the salary and the balance amount will
be shown in the profit and loss A/C.
The amount at which salaries expense will be shown in the Profit and Loss A/c is 16,000 – 1,000 =
Rs. 15,000.
Where:
Here Cost of the machinery = purchase price + installation expenses = 50,000 + 6,000 = Rs. 56,000

Depreciation = (56,000 – 6,000)/10 = Rs. 5,000
41. The equity shares are being issued at a premium of 20% thus the value of each share will be 10 + 2 =
Rs. 12
Total value of assets purchased = Rs. 3,64,800
Number of shares issued in consideration = total value of assets purchased/value per share = 3,64,800/
12 = 30,400 shares
To record this transaction share capital needs to be credited by the face value of the shares issued i.e.
30,400 × 10 = Rs. 3,04,000
Reserve account.
In the above question discount on shares reissued = Rs. 200 × 5 – 900 = Rs. 100
Amount available in shares forfeiture account = 200 × 2.5 = Rs. 500
The surplus amount to be transferred to capital reserve account = 500 – 100 = Rs. 400
time of forfeiture.
(iii) Credit ‘calls in arrear A/C’ with the amount due on forfeited shares. This cancels the effect of debit
Here the amount due from the forfeited shares were = 1,000 × 2 + 1,000 × 3 = Rs. 5,000
44. Invoice value of the goods destroyed = 1,600 which is 25% above cost
Thus cost = (100/125) × 1,600 = 1,280
Insurance claim will be settled at the actual value of the goods destroyed
Thus insurance claim accepted will be 50% of 1,280 = Rs. 640
45. Expenses which have been incurred but not been paid for till the end of the accounting year are known
as Accrued expenses or outstanding expenses. Outstanding expense amount is added to that particular
expense account in the Profit and loss or Trading Account because it was the expense for that year.
(Based on the matching principle)

ANSWERS
Outstanding expenses are liabilities for the business. Thus they will appear under the Current Liabilities
in the Balance Sheet.
Here Salary has been paid for 11 months from April 2011 to February, 2012 amounting Rs. 22,000.
So the salary for 1 month is outstanding
Salary for 11 months = 22,000
Salary for 1 month = 22,000/11 = Rs. 2,000
Thus outstanding salary shown in balance sheet will be Rs. 2,000.
46. Many times during the operation of business, the owner may take out some cash from the business for
his personal use. These withdrawals from the business are considered as Drawings. Considering the
fact that the business is a separate accounting entity, it charges an interest on the drawings to the owner.
Where interest is charged it is usually calculated at fixed rate percent from the date of each drawing to
the date the accounts are closed. If the dates on which the amounts are drawn are not given, interest is
calculated on the whole amount on the assumption that the money was drawn evenly throughout the
year. In such case interest will be charged for 6 months.
Here drawings = Rs. 50,000
Interest on drawings = 10% of 50,000 × 6/12 = Rs. 2,500
Bank reconciliation statement as on 31st March 2012
Balance as per cash book (Cr) 50,000
Add:
Bank charges 500
_______ 500
Add:
_______ 20,000
_______
Balance as per pass book (Dr) 70,500
_______
48. Betterments, which extend the useful life or improve the efficiency of the asset and meet the capitalization
threshold of the asset class to which it relates, must be added to the historical cost and amortized. A
revenue expenditure which increases the utility or productive capacity of an asset, is treated as capitalized

expenditure. Thus Rs.5,000 was spent by Saroj for addition to machinery in order to increase the production
capacity. The amount is Capital in nature.
49. Total amount of sales = Rs. 10,20,000
Sale of damaged stock at loss = Rs. 20,000
Thus sales made at 25% profit on sale = 10,20,000 – 20,000 = Rs. 10,00,000
Gross profit = 25% on sale less loss on sale of damaged stock = 25% on 10,00,000 less (30,000 – 20,000)
= 2,50,000 – 10,000 = Rs. 2,40,000
50. In financial accounting, every single event occurring in monetary terms is recorded. Sometimes, it just so
happens that some events are either not recorded or it is recorded in the wrong head of account or wrong
figure is recorded in the correct head of account.
Whatever the reason may be, there is always a chance of error in the books of accounts. These errors in
accounting require rectification. When there is a difference in a trial balance a suspense account is
opened with the amount of the difference so that the trial balance agrees (pending the discovery and
correction of the errors causing the difference).
Here the total of the debit and credit side of a trial balance of Mr. Rajiv as on 31st March, 2012 were
Rs. 20,000 and Rs. 10,000 respectively. Thus suspense account will have a credit balance of Rs. 10,000.
Now purchase return book which has a credit balance was overcasted by Rs. 1,500 – Rs. 1,400 =
Rs. 100. Thus we have to credit suspense account and debit purchase return account by rs 100. After
crediting suspense account by Rs. 100 the balance of suspense account will be Rs. 10,100 (cr).
51. Statement showing closing capital of Mr A as on 31.3.2012:
Capital introduced as on 1.4.2011 3,00,000
Add:
Further capital introduced during the year 50,000
Profit during the year 20,000
Less:
Drawings during the year 2,000 × 12 (24,000)
_______
Capital as on 31.3.2012 3,46,000
_______
52. Goods are normally sent on cost price to the consignee but some time the consignor makes the invoice at
the selling price i.e. proforma invoice price. The idea is that consignee should not know the actual cost of
the goods. In such cases the entries are made by the consignor in his books at the invoice price.
Here the goods are sent to the consignee at cost + 25%
Cost of goods sent = Rs. 10,000
Invoice value of the goods sent = 10,000 + 25% of 10,000 = Rs. 12,500

ANSWERS
53. On the death of a partner, the representatives are entitled to Share of profit upto the date of death. Profit
till date will be calculated on the basis of last years profit.
Thus share in profits for the period 1st january 2012 to 30th June 2012 to be credited to C’s Account will
Profit for the period on the basis of last year’s profit will be 24,000 × 6/12 = Rs. 12,000
Share of C in profit = 2/4 of 12,000 = Rs. 6,000
54. Statement showing increase /decrease in assets and liabilities
Assets Liabilities
Increase Decrease Increase Decrease
A purchased a car for Rs. 5,00,000 5,00,000
Making a down payment of Rs. 1,00,000 1,00,000
Signing a bill payable of Rs. 4,00,000 4,00,000
Thus total increase in assets = 5,00,000 – 1,00,000 = Rs. 4,00,000
And total increase in liabilities = Rs. 4,00,000
Correct option is (d) i.e. Both (b) and (c)
55. On 1.4.2011 purchase of machinery for Rs. 50,000 will be capitalized as its an asset . Expenses which
have been incurred but not been paid for till the end of the accounting year are known as outstanding
expenses. Outstanding expense amount is added to that particular expense account in the Profit and loss
or Trading Account because it was the expense for that year. (Based on the matching principle)
The expenses will include:
Electricity expenses 1,000
Salary 2,000
Outstanding Telephone expenses 200
_______
Total 3,200
_______
56. Trade discounts are generally ignored for accounting purposes in that they are omitted from accounting
records. Therefore, sales, along with any receivables in the case of a credit sale, are recorded net of any
trade discounts offered.
Here the cost of goods sold = 10,000
Invoice price will be = 10,000 + 10% of 10,000 = 11,000
Trade discount = 5% of 11,000 = Rs. 550

57. A debt from accounts receivable that is recovered either in whole or in part after it has been written off
or classified as a bad debt is known as bad debt recovery . Because it generally generates a loss when
it is written off, a bad debt recovery usually produces income.
In accounting, the bad debt recovery would credit the “bad debts” account and the net amount of the
account is transferred to profit and loss account.So the bad debt recovered from Gauri will not effect the
account of Gauri and the correct option is (c) nil.
58. The goods withdrawn by Ramesh for personal use will be debited to his salary Rs. 1,500 and the when
he received Rs. 9,000 again in cash for salary he got Rs. 500 excess salary so it should be debited to
salaries paid in advance as per the matching principle.
59. The original cost of an asset takes into consideration all of the costs that can be attributed to its purchase
and to putting the asset to use. These costs can include such factors as the purchase price,
repairs,commissions, transportation, appraisals, warranties and installation.
Thus repairs incurred to bring the old furniture bought to use will be capitalized and will be included in the
total cost of the asset and will not be debited to repairs account.
Correct option is (d) nil
60. This is an error of commission where an amount is posted in the wrong account but on the same side so
in this case there will be no effect on the trial balance since the amount is placed on the correct side
though in the wrong account.
Option (b) is correct.

ANSWERS

1. Financial statements are prepared at points of time due to Periodicity.

2. Real accounts relate to assets of firm and not debts.
3. The purchase of typewriter is a transaction.
4. Profit leads to increase in capital as well as assets.
5. Vikas and Co. is a personal account.
6. Depreciation is charged due to physical wear and tear of asset.
7. A promissory note doesn’t require acceptance.
8. Sales return, BR, carriage inwards all have debit balance. Outstanding wages has Cr. balance.
9. Total of sales journal not posted to sales account is an error of omission.
10. Prepaid salary has debit balance.
11. Equality of Dr. and Cr. of trial balance does not ensure accuracy of individual accounts.
12. Change in method of depreciation is change in accounting policy not estimate.
13. Cr. balance in cash book means overdraft as per pass book.
14. Sale of scraps of raw material are shown on Cr. side of Manufacturing A/c.
15. Goodwill is an intangible asset.
16. Joint venture account shows profit/loss, hence nominal in nature.
17. Abnormal loss on consignment is credited to consignment A/c but debited to P&L A/c.
18. Bank debits the account of customer when he withdraws money.
19. 3 days of grace are added in case of time bills for calculation of Maturity date.
20. Cash discount allowed should be credited to customer’s A/c.
21. When a new stock (share) issue has more buyers than there are shares to satisfy their orders. This
‘excess of demand over supply’ occurrence is known as oversubscription of shares. Here 25,000 shares
were issued whereas application was received for 75,000 shares. So this is the case of oversubscription.
‘Pro-Rata’ Used to describe a proportionate allocation. A method of assigning an amount to a fraction,
according to its share of the whole. Pro-rata allotment accounting tells you the system of use surplus of
over-subscription money for adjusting the allotment money and other calls. Here excess money was

refunded to them after adjustment for further calls. So this is the case of prorate allotment.
Forfeited Shares are shares in a company that the owner loses (forfeits) by failing to meet the purchase
requirements. Requirements may include paying any allotment or call money owed, or avoiding selling or
transferring shares during a restricted period. When a share is forfeited, the shareholder no longer owes
any remaining balance, surrenders any potential capital gain on the shares and the shares become the
property of the issuing company. The issuing company can re-issue forfeited shares at par, a premium or
a discount as determined by the board of directors. Here excess money was refunded to them after
adjustment for further calls. So this is the case of forfeiture of shares.
Thus option (d) is the correct option.
22. On the death of a partner, the representatives are entitled to Share of profit upto the date of death, share
in reserves of firm and share in JLP. Profit till date will be calculated on the basis of last years profit.
23. In case of revaluation, the depreciation is calculated on the total revalued amount over a period of
balance useful lives assessed on the date of revaluation. New cost for the purpose of depreciation will be
gross cost less accumulated depreciation on the date of revaluation. Along with this, the revaluation
reserve is amortised to the income statement based on the useful life of the asset to which it relates. This
is done to ensure that depreciation on the revalued amounts shouldn’t inflate/ deflate the income statement.
Date Particular Amount Amount
1.1.2008 Cost of machinery 15,00,000
Less : Depreciation for 3 years on straight line basis 15,00,000/15 3,00,000
× 3 = 3,00,000
1.1.2011 Wdv of the machinery 12,00,000
1.1.2011 Revaluation of machinery 3,00,000
1.1.2011 New cost of the machinery 15,00,000
Depreciation = Rs. 15,00,000/12 = Rs. 1,25,000
24. The value of closing inventory will be Rs. 35,500 (A – Rs. 9,500, B – Rs. 12,000 and C – Rs. 14,000).
records. Therefore, purchases, along with any payables in the case of a credit purchase, are recorded
net of any trade discounts offered.
Here the cost of goods purchased = 50,000
Trade discount = 15% of 75,000 = Rs. 11,250
Thus purchases to be recorded before cash discount = invoice price –trade discount = 75,000 – 11,250 =
Rs. 63,750.
26. In the books of M/S Chandini, receivable from M/S Nandini was Rs. 35,500. The cheque received from
Nandini was for Rs. 35000 in full settlement of her account. So the discount allowed by Chandini was Rs.

ANSWERS
500. And as cheque is being received on 1st of October and was deposited on 4th of October,
On 1st October the entry in the books will be:
Cash A/c ……………dr 35000
DiscountA/c………..dr 500
M/S Nandini A/c 35500
27. Building improvements are capital events that materially extend the useful life of a building or increase
the value of a building, or both. A building improvement should be capitalized as a betterment and recorded
as an addition of value to the existing building .
Expenditures to be capitalized as improvements to buildings include
• Additions to buildings, such as expansions, extensions, enlargements, etc.
• Installation or upgrade of plumbing and electrical wiring.
Here cost of extension of building is Rs. 5,00,000 and cost of improvement in electric wiring system is Rs.
25,000. These 2 expenses will be capitalized.
And the amount to be expensed will be:
Repair cost 15,000
Whitewash 10,000
Total expenses = 15,000 + 10,000 = Rs. 25,000
In accounting, the bad debt recovery would credit the “bad debts recovered” account and the net amount
of the account is transferred to profit and loss account.So the bad debt recovered from Anshul will not
effect the account of Anshul and the rectification entry to be passed will be:
Anshul’s A/c Dr. Rs. 6,000
To Bad debts recovered A/c Rs. 6,000.
29. A transaction relating to bank has to be recorded in both the books i.e. Cash Book and Pass Book but
sometimes it happens that a bank transaction is recorded only in one book and not recorded simultaneously
in other book this causes difference in the two balances. The causes for difference may be interest
charged directly by bank not entered in cash book. This difference can be adjusted in the bank reconciliation
statement or before the preparation of the reconciliation statement. If this difference is adjusted before
the preparation of the reconciliation statement then it will not effect the reconciliation statement.
Here the interest of Rs. 500 charged directly by the bank was not entered in the cash book and the same

was adjusted in the cashbook before reconciliation statement. So now there is no difference between the
books because of this particular transaction and this interest will be ignored while preparing bank
reconciliation statement.
30. Lets look into the following:
Cost of Goods manufactured = Direct materials cost + Direct labor cost + Factory overhead cost +
Opening work in process inventory – Ending work in process inventory
Cost of goods sold (COGS) = Cost of goods manufactured + Opening finished goods inventory – Ending
finished goods inventory
Cost of sales means the price paid for the product, plus any additional costs required getting the goods
into stock and ready for sale. It includes delivery and handling cost . The formula for calculating cost of
sales is starting Inventory + Purchases – Ending Inventory.
Cost to Company (CTC) is the salary package of an employee. It indicates the total amount of expense
an employer (organization) is spending for an employee in a year. CTC is not the actual salary of an
employee, it also includes all the facilities an employee is getting during the service period.
Cost of goods sold involves finished goods and in the given question only details of raw materials are
given so this cannot be cost of goods sold.
Cost of sales is similar to cost of goods sold. So this problem also not deal with same.
Cost to company has no relevance in the given problem .
So here 10,000 (opening raw material) + 50,000 (wages) + 5,000 (carriage) + 2,00,000 (purchases of raw
materials) + 1,25,000 (factory overhead) – 15,000 (closing inventory of raw materials) = Rs. 3,75,000
will be transferred to cost of goods manufactured.
31. Remuneration paid for services is called commission. Commission is always paid on sales. Over-riding
commission is an extra commission allowed to the consignee in addition to the normal commission. Such
additional commission is generally allowed:
(i) To provide additional incentive to the consignee for the purpose of introducing and creating a market
for a new product
price.
Commission on goods sold on invoice price = 5% of 2,00,000 = 10,000
Commission on goods sold 10% above cost = 5% of 1,10,000 = 5,500
Total commission = 10,000 + 5,500 = Rs. 15,500
32. Loss of quantity of goods in the normal course of business and inherent and thus inevitable or unavoidable,
such as loss because of loading and unloading of goods, leakage, evaporation or shrinkage is known as
normal loss.

ANSWERS
The treatment of normal loss is to charge it to consignment account. The total cost of goods sent is
charged to the units remaining. Value of inventory is inflated to cover the normal loss. In other words
such loss is absorbed by the remaining units.
Here total cost of the oranges = 1,000 × 8 + 925 = Rs. 8,925
Since 15% loss is unavoidable
The balance oranges left = 1,000 – 15% of 1,000 = 850 Kgs
Thus cost per orange after adjusting loss will be = 8,925/850 = Rs. 10.50
33. Consignment is the act of consigning, which is placing any material in the hand of another, but retaining
ownership until the goods are sold or person is transferred. A joint venture takes place when two parties
come together to take on one project.
Here the cost of goods sent on consignment = Rs. 20,000 which is the cost of consignment.
Ajay draws bill on Bijay for 80% of the cost of consignment, thus the amount of the bill drawn will be =
80% of 20,000 = Rs. 16,000.
34. Accounting Estimates involve management’s judgment of expected future benefits and obligations relating
to assets and liabilities (and associated expense and income) based on information that best reflects the
conditions and circumstances that exist at the reporting date. By its nature, estimates are subjective and
may require frequent revisions in future. Estimates must be revised when new information becomes
available which indicates a change in circumstances upon which the estimates were formed. Changes in
Accounting Estimates must be accounted for prospectively in the financial statements, i.e. the effects of
the change must be incorporated in the accounting period in which the estimates are revised. Therefore,
carrying amounts of assets and liabilities and any associated expense and gains are adjusted in the period
of change in estimate. Prospective application of changes in estimates prevents frequent revisions in
prior period comparative figures which might cause unnecessary complications in respect of financial
statement balances that are expected to be revised in future due to availability of new information or the
experience of new events.
Here the company should account for the change in estimate prospectively by allocating the net carrying
amount of the machinery over its remaining useful life. No adjustment is required to restate the depreciation
charge in previous accounting periods.
Depreciation expense for the machine would therefore be as follows:
Depreciation Expense Accumulated Depreciation Working
31.3.2010 1,00,000 1,00,000 (10,00,000/10)
31.3.2011 1,00,000 2,00,000 (9,00,000/9)
31.3.2012 80,000 2,80,000 ((10,00,000 – 2,00,000)/10)
Although expected useful life of the machine has increased at the end of second year, depreciation
expense recorded in previous years is not affected. Instead, the depreciation expense is decreased
accordingly in the remaining years.

ownership until the goods are sold or person is transferred. Remuneration paid for services is called
commission. Commission is always paid on sales. Over-riding commission is an extra commission allowed
to the consignee in addition to the normal commission. Such additional commission is generally allowed:
for a new product
price.
Here cost of the goods sent on consignment = 1,00,000
Invoice price = cost + 25% = 1,00,000 + 25% of 1,00,000 = 1,25,000
Invoice price of the goods sold = 3/5th of the total invoiced goods = 3/5th of 1,25,000 = 75,000
Commission on sales = 2% on sales = 2% of 85,000 = 1,700
Overriding commission = 20% on gross sales less all commission exceeding its invoice value
Let the overriding commission be x
Total commission = 1,700 + x
Gross sales less all commission = 85,000 – 1700 – x
Overriding Commission = 20% of (85,000 – 75,000 – 1,700 – x) = x
Or 1,660 – .2x = x
Or 1.2x = 1,660
Or x = 1,383
Here cost of goods sent on consignment = Rs. 10000
Here we can find out amount to be remitted to Anuj by Bittu with the help of Consignee account in the
books of Anuj and the consignment account
Consignment account
To goods sent on consignment A/c 10,000 By Bittu A/c-sales 15,000
To bank-freight paid 1,000

ANSWERS
To bank-discounting charges 500

To Bittu A/c-commission 500
To P&L–transfer to profit 1,500
To Bittu-profit share 1,500
________ ________
15,000 15,000
________ ________
Bittu account
To consignment A/c 15000 By bills receivable 10,000
By consignment A/c-profit
share 1,500
By consignment-commission 500
By balance c/d-balance
receivable 3,000
________ ________
15000
________ 15,000
________
37. In the cases where a bill is payable at a fixed period after sight, the time is to be calculated from the date
of the acceptance if it is accepted . If the instrument is made payable at the stated number of months
after sight it becomes payable three days after the corresponding date of the month. If the month in
which the period would change has no corresponding day, the period shall be liable to change on the last
day of such month. Three days of grace must be added to it. In calculating the date at which promissory
note or bill of exchange made payable a certain number of days after sight , the day of the date of
presentment for acceptance or sight shall be excluded.
Thus the date which comes after adding stated number of days to the date of the bill,shall be the due date
and the date of bill is excluded. And for finding the date of maturity 3 days as days of grace is added to
the due date.
Here the bill was accepted on 8.12.2011. By adding 30 days to this date we get 7.1.2012.
Now by adding 3 days of grace we get 10.1.2012.
38. Bills of exchange is a financial service, where the Bank purchases drawn bills, from the domestic trade
transactions, confirmed in particular with an invoice - with right of recourse to you - and credits you with
the amount of the bill of exchange less discount interest and additional costs related to the bill, accrued in
advance from the discount date to the bill payment term.
Here amount of the bill = Rs. 30,000
The bill was accepted by Yash on 1st January but was discounted on 4th February so,
Amount to be paid to bank on discounting at 12% pa = 30,000 × 12/100 × 2/12 = Rs. 600

When a bill of exchange is dishonored, the holder can get such fact noted on the bill by a notary public. The
advantages of noting is that the evidence of dishonored is secured. The noting is done by recording the
fact of dishonored, the date of dishonor, the reason of dishonor, if any. For doing all this the notary
public charges his fees which is called noting charges.
In case the bill is renewed the interest will not be charged on the noting charges which will be treated
separately and will not be clubbed with the amount of the bill.
Here Total amount of the Y’s acceptance = 25,000
Amount paid in cash on maturity by Y = Rs. 5,000
Amount of the renewed bill = Rs. 20,000
40. Consignment means the owner of the goods can consign the goods to an agent.The agent will sell the
goods for him and receive a commission in return. Goods sent on consignment are the property of the
consignor until the goods are sold.The consignor should include all the unsold goods on consignment in his
closing stock.
Consignment account is a profit and loss account for the consignment. All the expenses and income are
recorded in this account.
Consignment account
To goods sent on consignment 2,00,000 By K-sales (4/5 of 200000 1,92,000
To bank-expenses 5,000 + 20% of 4/5th of 200000)
To K a/c–expenses 2,000 By closing stock 41,000
To k a/c-commission 5,000 (200000 + 5000) × 1/5
To profit on consignment 21,000
________ ________
2,33,000 2,33,000
________ ________
Note: In valuation of closing stock consignee’s expenses related to sales and commission is not taken in
account.
Profit on venture can be ascertained with the help of the joint venture account.
Goods bought on joint venture as well as expenses incurred in connection with the business are debited

ANSWERS
to the joint venture account and credited to the coventurers’s account or the joint bank account. When
the goods are sold, the amount thereof is debited to the coventurer’s account or the joint bank account
and credited to the joint venture account. If the parties have taken over plant or materials etc., the value
will be debited to the account of the party concerned and credited to the joint venture account. The joint
venture account will now show profit or loss which will be transferred to the personal accounts of the
respective parties in their profit sharing ratio.
Joint venture with Vansh A/c
To purchases-supplies 10,000 By Vansh a/c-sales 15,000
To bank-expenses 1,000 By Vansh a/c-drawings 2,000
To Vansh A/c-carriage 1,000
To net profit transferred to-
Profit and loss A/c 2,500
Vansh A/c 2,500 5,000
________ ________
17000
________ 17000
________
42. Debenture is a certificate/instrument acknowledging a debt. It is issued generally by a public company to
individuals/institutions who lend it money (invest in their debentures)For an investor investing in a debenture
is just like investing in a fixed deposit with the difference that while he can withdraw the amount invested
in a fixed deposit any time he/she likes with a loss of interest.. he cannot do so with a debenture. The
amount invested on a debenture will be repaid only on the expiry of the period for which the debenture
has been issued. if the debentures were originally issued at a premium if the current balance of premium
or the premium received on debentures originally issued is less than the premium on redemption then the
case of loss on redemption of debentures arise.
Here Prakash Ltd. issued 15,000, 15% debentures of Rs.100 each at a premium of 10%, which are
redeemable after 10 years at a premium of 20%.
The premium on redemption of debentures = 20% of 15,00,000 = 3,00,000
Loss on redemption of debentures = Rs. 3,00,000
The loss on redemption of debentures is to be written off in the period for which the debentures are being
issued.
43. Sale or return is a term sale, where the seller sold goods on the basis of return, there might be a chance
of return of goods, or acceptance of goods, or acceptance of part of goods. This method is also called the
Sale on Approval basis.
When the transactions of sending the goods on sale or return basis are few, the seller may treat it as
normal sale and record it in the books accordingly. However, if the goods are sent on sale or return basis,
the unsold goods must be included in the stock at cost. When the goods sent on sale or approval basis are
treated as sale, for the goods not yet approved, the sale entry is reversed at the year end.

Here Varun Ltd. sends goods to his customers on Sale or Return basis by recording it as a sale at the time
of sending it for approval.When a letter of approval was received from a customer for Rs. 40,000 this
transaction is already recorded in the books.
So No entry is required for receiving the letter of approval from the customer.
44. Super Profits are the profits earned above the normal profits. Under this method Goodwill is calculated
on the basis of Super Profits i.e. the excess of actual profits over the normal profits. Steps for calculating
Goodwill under this method are given below:
Here:
Normal profits = 4,00,000 × 10% = 40,000
Average profit of the last three years = (42,000 + 39,000 + 45,000)/3 = 42,000
Super profits = 42,000 – 40,000 = 2,000
Goodwill = 2,000 × 3 = Rs. 6,000
Interest from 1-4-2010 to 31-12-2010 i.e. for 9 months from the date of issue of debentures is accrued
and due = 14% of 1,00,000 × 3/12 + 14% of 1,00,000 × 6/12 = 1,05,000
Interest from 1-1-2011 to 31-3-2011 is the interest which is accrued but not due = 14% of 1,00,000 ×
3/12 = 35,000.
to the joint venture account and credited to the coventurers’s account or the joint bank account. When
the goods are sold, the amount thereof is debited to the coventurer’s account or the joint bank account

ANSWERS
and credited to the joint venture account. If the parties have taken over plant or materials etc., the value
will be debited to the account of the party concerned and credited to the joint venture account. The joint
Joint venture A/c
To Anny A/c-supplies 20,000 By Bunny a/c-sales 25,000
To Anny-commission 200
To Bunny A/c -commission 1,250
To net profit transferred to- 3,550
Anny A/c 1,775
Bunny A/c 1,775
________ ________
25,000
________ 25,000
________
47. Sometimes it is decided by the existing partners to change their Profit sharing ratio. This change may
result in gain to a few partners and loss to others. The partners who are going to gain due to this change
in the profit sharing ratio should compensate the sacrificing partner/partners. Hence for this purpose a
few adjustments have to be made in the books of the firm. A Change in the profit sharing ratio of the firm
means that gaining partner is going to purchase from the sacrificing partner his share of profits. The
gaining partner must compensate the sacrificing partner by paying the sacrificing partner the proportionate
share of goodwill which is equal to share gained by him.
Gaining/sacrificing ratio
Partners New ratio Old ratio Gain/(sacrifice)
A 4/9 1/3 4/9-1/3 = 1/9
B 3/9 1/3 3/9-1/3 = 0
C 2/9 1/3 2/9-1/3 = (1/9)
Here we see that A is gaining 1/9th share and C is sacrificing 1/9th share because of the change in the
profit sharing ratio.
So A must compensate the C by paying him the proportionate share of goodwill which is equal to share
gained by him.
48. Share of goodwill gained by A = 1/9 of 90,000 = Rs. 10,000
The journal entry for the same will be
A’s capital account dr 10,000
To C’s capital account cr 10,000

When a new partner is admitted in the firm, the existing/old partners have to sacrifice, what is given to
of capital they have taken before. The new partner when admitted has to compensate for all these
the firm.
If the new partner brings in cash for his share of goodwill, in addition to his capital, it is known as premium
method.
The premium brought in by Z in the above case = Rs. 4,500 which equals to his share in the firm which
is 1/6
Thus the total value of goodwill of the firm will be 4,500 × 6 = Rs. 27,000
49. When a new partner comes into the business, old partners have to give him his profit share from their
portion. Thus change in profit sharing ratio is an important aspect to be considered on reconstitution by
admission. In academic accounting, change in profit sharing ratio can be presented in various ways. The
existing partners may decide to change their profit sharing ratio for various reasons. When the profit
sharing ratio is revised among existing partners, there ought to be a partial sacrifice of profit share by
some partners in favour of others. The sacrifice of one or a group of partners becomes the gain of the
remaining partners. Following is the formula for calculating sacrificing ratio:
Sacrificing ratio = Old ratio – new ratio
Hum 7/16 5/8 7/16-5/8 = (3/16)
Tum 5/16 3/8 5/16-3/8 = (1/16)
Woh 4/16 4/16
So the sacrificing ratio between Hum:Tum will be 3/16:1/16 = 3:1
Reserve account.
In the above question discount on shares reissued = number of shares reissued × discount allowed per
share = 150 × (75-65) = Rs. 1,500

ANSWERS
Amount available for the reissued shares in shares forfeiture account = number of shares reissued ×
amount forfeited per share = 150 × (75-50) = 150 × 25 = Rs. 3,750
51. Equity shares are issued at a premium of 10%. So the amount available in the securities premium
account = 10% of 2,00,000 × 10 = Rs. 2,00,000
time of forfeiture.
to such calls which take place when the amount is made due. forfeited shares account will be
credited by the amount which has been received in respect of forfeited shares.
Here Manju paid application money @ Rs. 2 per share and allotment money @ Rs. 4 per share but did
not pay the final call money so 300 shares held by her was forfeited.
Thus amount to be transferred to the shares forfeited account will be = 300 × 2 + 300 × 4 = Rs. 1,800
53. On the death of a partner, the representatives are entitled to Share of profit upto the date of death. Profit
till date will be calculated on the basis of last years profit.
Here the profit of the accounting year 2011-2012 i.e. last year = 24,000
The profit sharing ratio of Raj, Jai and Hari is 7 : 5 : 4
Thus share in profits for the period 1st April 2012 to 30th June 2012 to be credited to Hari’s Account will
Profit for the period on the basis of last year’s profit will be Rs. 24,000 × 3/12 = Rs. 6,000
Share of Hari in profit = 4/16 of 6,000 = Rs. 1,500
54. Here 10,000 equity shares of Rs. 10 each were issued to public at a premium of Rs. 2 per share.
Applications were received for 12,000 shares. The excess application money and the premium money
received will be shown in the current liabilities till the further course of action is decided.
So the amount of securities premium account will be number of shares issued × premium per share =
10000 × 2 = Rs. 20,000
So the proportion in which the shares will be alloted = total shares allotted/total shares applications
Here company offers to the public 10,000 shares for subscription and receives application for 12,000
shares.

So the proportion in which the shares are to be allotted = 10000/12000 = 5/6
i.e. 5 shares for every 6 shares applied
56. A redeemable preference share can be redeemed either –
Entirely out of fresh issue of new preference or equity shares
(but not debentures). Or
Entirely out of divisible profits. Or
Partly out of fresh issue and partly out of divisible profits.
Here the Board of Directors of a company decides to issue minimum number of equity shares and the
maximum amount of divisible profits available for redemption is Rs. 3,00,000. So this is the case of
redemption partly out of fresh issue and partly out of divisible profits.
Total value of preference shares to be redeemed = Rs. 5,00,000
Less: divisible profits available for redemption = Rs. 3,00,000
Total value of shares to be issued = 2,00,000
Value per equity share = Rs. 9
Thus shares to be issued = 2,00,000/9 = 22,223 shares
57. Whenever a company redeems its preference shares then the nominal value or face value of the shares is
put into capital redemption reserve fund. There after this fund becomes the part of the paid capital of the
company.
Capital Redemption Revere is also created when a company buys it owns shares which reduce its share
capital.
The capital redemption reserve fund is transferred from undistributed profits i.e general reserves, profit
or loss account.
A redeemable preference share can be redeemed entirely out of fresh issue of new preference or equity
shares but not debentures.
Here the face value of the 12% Redeemable preference shares to be redeemed = 3000 × 100 = 3,00,000
Face value of the fresh equity shares issued for the purpose = 25,000 × 10 = 2,50,000
Thus amount to be transferred to the Capital Redemption Reserve Account = 3,00,000 – 2,50,000 =
Rs. 50,000
58. When debentures are issued at a premium, the issue price is more than the par value. The premium is
transferred to securities premium account.

ANSWERS
Here 15,00,000, 12% debentures of Rs. 50 each are issued at premium of 10%
The face value of debentures issued is = 15,00,000 × 50 = 7,50,00,000
Thus the amount of premium will be = 10% of 7,50,00,000 = Rs. 75,00,000
59. In this problem G Ltd. purchased land and building from H Ltd. for a book value of Rs. 2,00,000 and the
consideration was paid by issue of 12% Debentures of Rs. 100 each at a discount of 20%
the debentures are being issued at a discount thus the value of each share issued will be 100 – 20% of
100 = 100 – 20 = 80
Total value of land and building acquired = Rs. 2,00,000
Number of debentures issued = total value of assets acquired/value per debenture = 2,00,000/80 = 2,500
debentures
Thus the debentures account will be credited by 2,500 × 100 = Rs. 2,50,000
60. Loss on redemption of debenture will be equal to the premium at which the debentures are redeemable
after number of years
Here loss on redemption of debenture will be equal to the premium of 20% at which the debentures are
redeemable after 5 years
The face value of 8% debentures = Rs. 20,000 × 10 = Rs. 2,00,000
Thus loss on redemption of debentures will be = 20% of 2,00,000 = Rs. 40,000
This loss on redemption of debenture will be written off over the period for which the debentures are
issued. Thus this loss will be written off for 5 years here.
The amount of loss on redemption of debentures to be written off every year will be 40,000/5 = Rs. 8,000

1. Expense will be Rs. 50,000 as per Accrual concept.

2. Loss leads to reduction in Capital.
3. Accounting standards are the set of broad accounting policies to be followed by an entity.
4. The given statement holds true for substance over form.
5. Amount of provision of doubtful debts is an accounting estimate.
6. The order of recording of accounting transactions and events is : Journal, Ledger, Profit & Loss A/c,
Balance Sheet.
7. Expired portion of Capital expenditure is shown as an expense in financial statements.
8. Updation of computer is capital in nature.
9. Currency transactions and events are recorded in books of accounts in the ruling currency of country
where books of account are prepared.
10. Compensating, complete omission, errors of principle don’t affect trial balance. Only error of partial
omission do affect trial balance.
11. Unintentional mistakes are errors.
12. Trial balance shows the Dr. Balance or Cr. Balance of all accounts.
13. It is easy to detect Errors than to Frauds.
14. The words ‘To bal. b/d’ are written on Dr. Side in case of Dr. Balance.
15. Amount spent on maintenance of plant and machinery is revenue expense.
16. Bank pass book is also called bank statement.
17. Capital expenditures are recorded in balance sheet as they are not revenue in nature(thus not charged to
P& L A/c)
18. Account Receivable normally has Dr. Balance.
19. Account is a formal record of changes in items of similar nature.
20. Under fixed installment method, depreciation is of equal usage of asset over different years of its useful
life.
21. Conservatism concept being followed in the given case.

ANSWERS
22. Objection of auditor is justified due to reasons mentioned in option (C).

23. When owner withdraws money from a business for personal expenses it is known as drawings. Drawings
accounting is used when an owner of a business wants to withdraw cash for private use. The book-
keeping entries are recorded on the drawings account.
This drawings account is deducted from the capital account.
Here Mr. X spends Rs. 5,000 to meet his family expenses thus cash resources of the busi ness is going
down by Rs. 5,000 and since drawings is deducted from the capital account the balance of the capital
account goes down by Rs 5,000.
The balance of capital and cash accounts will be Rs. 6,95,000 and Rs. 1,95,000.
24. Realization concept in accounting, also known as revenue recognition principle, refers to the application
of accruals concept towards the recognition of revenue (income). Under this principle, revenue is
recognized by the seller when it is earned irrespective of whether cash from the transaction has been
received or not. The accrual journal entry to record the sale involves a debit to the accounts receivable
account and a credit to sales revenue; if the sale is for cash, debit cash instead. The revenue earned will
be reported as part of sales revenue in the income statement for the current accounting period.
Here Mr. Mohan sold merchandise for Rs. 60,000. Customers paid him Rs. 50,000 cash and assured him
to pay Rs. 10,000 shortly.
The amount of revenue earned by him is Rs 60,000.
Cost of goods sold in the above case = 3,10,000
Gross profit = sales-cost of goods sold = 4,00,000 – 3,10,000 = Rs. 90,000
26. Cheques deposited but not credited: When cheques received from customer are deposited into the bank
for collection, an entry is made on the debit side of the cash book in the bank column and thereby the bank
balance as per Cash Book increases the amount whereas the bank credits the customer’s account only
after collecting the proceeds of the cheques. After the credit entry is made by the bank the balance as
per Pass book will also increase and thus both the balances will agree. The process of collection of
cheque requires time and due to this gap, some cheques deposited into the bank may remain uncredited
by the bank. Hence the balances of both the books disagree.
Here out of the cheques amounting to Rs. 5,000 deposited, cheques aggregating Rs. 1,500 were credited
in March and cheques aggregating Rs. 2,000 credited in April and the rest have not been collected. The
cheques credited by bank till 31st march will be shown in the bank statement. Thus cheques amounting to
5,000 – 1,500 = 3,500 has not been credited in the bank statement and so this amount is to be subtracted
from the balance of the cash book.

Thus the effect while preparing bank reconciliation statement when balance as per cash book (debit
balance) as on 31st March is the starting point will be to subtract Rs. 3,500.
to the joint venture account and credited to the coventurer’s account or the joint bank account. When the
goods are sold, the amount thereof is debited to the coventurer’s account or the joint bank account and
credited to the joint venture account. If the parties have taken over plant or materials etc., the value will
be debited to the account of the party concerned and credited to the joint venture account. The joint
Joint venture A/c
To purchases-land 30,000 By sales 60,000
To net profit 30,000
________ ________
60,000
________ 60,000
________
28. A bill of exchange is said to be dishonoured when the drawee refuses to accept or make payment on the
bill. A bill may be dishonoured by non-acceptance or non-payment.
If the drawee refuses to accept the bill when it is presented before him for acceptance, it is called
dishonour by non-acceptance. When a bill is dishonoured by non-acceptance, an immediate right of
recourse against the drawer and endorser accrues to the holder. In this case, presentment for payment
is not necessary.
If the drawer has accepted the bill, but on the due date, he refuses to make payment of the bill, it is called
dishonour by non-payment. In this case the holder has immediate right of recourse against each party to
the bill.
Here the bill returned dishonored as Y became insolvent and 40 paise per rupee is recovered from his
estate.
So the amount recovered is:
Total amount of the bill = 1,00,000
Amount recoverd per rupee = 40 p
So the amount of the bill recovered = 1,00,000 × 40/100 = Rs. 40,000
29. The amount of an asset or resource that exceeds the portion that is utilized. A surplus is used to describe
many excess assets including income, profits, capital and goods. A surplus often occurs in a budget, when

ANSWERS
expenses are less than the income taken in, or in inventory when fewer supplies are used than were
retained.
Here surplus will be:
Goods sold 1,47,000
Add goods in hand 15,000
Less purchases 1,15,000
Less rent paid 5,000
________
Surplus 42,000
________
Here the cost of goods sold = 600
Invoice price will be = 600 + 10% of 600 = 660
Trade discount = 5% of 660 = Rs. 33
Thus sales to be recorded = invoice price –trade discount = 660 – 33 = Rs. 627
31. When a credit sale involves the application of sales tax, the receivable balance includes the amount of
sales tax since it will be recovered from the customer. Sales is recorded net of sales tax because any
sales tax received on the sales will be returned to tax authorities and hence, does not form part of income.
Sales tax account is credited since this is the amount of tax payable that will be paid to tax authorities.
The accounting entry to record a credit sale involving sales tax will therefore be as follows:
Debit Receivable (Gross Amount)
Credit Sales (Net Amount)
Credit Sales Tax (Payable) (Net Amount)
Here Goods sold for cash Rs. 10,000, plus 10% sales tax. Sales will be credited net of sales tax i.e. Rs.
10,000.
32. The goods withdrawn by Ganesh for personal use will be debited to his salary Rs. 2,500 and the when he
received Rs. 9,500 again in cash for salary he got Rs. 2,000 excess salary so it should be debited to
salaries paid in advance as per the matching principle.
33. The loss on theft of cash and any other assets may be simply be expensed to the income statement net
of any insurance claim received or receivable. Following accounting entries would therefore be required:
Debit Cash embezzlement a/c
Credit Cash A/c

Here Rs. 6,000 stolen from the safe of the firm will be recorded as:
Dr. Cash embezzlement a/c and Cr. Cash a/c Rs. 6,000.
figure is recorded in the correct head of account.
Whatever the reason may be, there is always a chance of error in the books of accounts. These errors in
accounting require rectification. When there is a difference in a trial balance a suspense account is
opened with the amount of the difference so that the trial balance agrees (pending the discovery and
correction of the errors causing the difference).
Here since after preparing the trial balance the accountant finds that the total of the debit side is short by
Rs. 1,000.
This difference will be debited to suspense account to incease the balance of the debit side of the trial
balance.
35. The difference in trial balance is due to wrong placing of Misc. Expenses A/c. It should come on Dr.
side.
36. The amount of the profits (or loss) as arising to the partnership firm in a year or period is apportioned in
accordance with the terms of the partnership agreement relating to the sharing of profits and losses.
Here Sita and Gita are partners sharing profits and losses in the ratio of 3 : 2 and during the year firm
earned Rs. 7,800 after allowing interest on capital.
Profits apportioned among Sita and Gita is:
Sita’s share = 3/5 of 7,800 = Rs. 4,680
Gita’s share = 2/5 of 7,800 = Rs. 3,120
37. A sale to A recorded in Purchases book would affect sales, Purchases and A.
38. “Super Profit”, means the excess of chargeable profit that has been earned by the company. The
chargeable profits must be in excess of it deductions. In other words the excess of the chargeable profits
must be in excess of its deduction of its chargeable profits. Super Profits are the profits earned above the
normal profits
Steps for calculating super profit are given below:
(ii) Super Profits = Average Profits – Normal Profits
Here capital employed = 1,00,000
Average profit = Rs. 25,000
Normal rate of return = 20%

ANSWERS
So normal profit = 20% of 1,00,000 = Rs. 20,000

Thus super profits = 25,000 – 20,000 = Rs. 5,000
39. Capitalisation of Average Profits Method:
Under this method we calculate the average profits and then assess the capital needed for earning such
average profits on the basis of normal rate of return. Such capital is called capitalised value of average
profits. The formula is:
Capitalised Value of Average Profits = Average Profits × (100 / Normal Rate of Return)
Capital Employed = Assets – Liabilities
Goodwill = Capitalised Value of Average Profits – Capital Employed
Here capital employed = 1,00,000
Average profit = Rs. 20,000
Normal rate of return = 15%
Capitalised Value of Average Profits = 20,000/15% = Rs. 1,33,333
Goodwill = 1,33,333 – 1,00,000 = Rs. 33,333
A 3/6 1/2 3/6-1/2 = (nil)
D 2/6 1/2 1/3-1/2 = (1/6)
So the sacrificing ratio between A : D will be 0 : 1/6
41. Sometimes it is decided by the existing partners to change their Profit sharing ratio. This change may
result in gain to a few partners and loss to others. The partners who are going to gain due to this change
in the profit sharing ratio should compensate the sacrificing partner/partners. Hence for this purpose a
few adjustments have to be made in the books of the firm. A Change in the profit sharing ratio of the firm
means that gaining partner is going to purchase from the sacrificing partner his share of profits. The

gaining partner must compensate the sacrificing partner by paying the sacrificing partner the proportionate
share of goodwill which is equal to share gained by him.
A 3/10 1/4 3/10-1/4 = 2/40
B 3/10 1/4 3/10-1/4 = 2/40
C 2/10 1/4 1/5-1/4 = (1/20)
D 2/10 1/4 1/5-1/4 = (1/20)
Here we see that D is sacrificing 1/20th share
42. If any amount has been called by the company either as allotment or call money and a shareholder has
not paid that money, this is known as calls in arrears.
If any call has been made but while paying that call, some shareholders paid the amount of the rest of
calls also, then such amount will be called as calls in advance.
Calls in advance and calls an arrears are not entitled for any dividend declared by the company.
Here Equity share capital called up = Rs. 5,00,000
Calls in arrear = Rs. 40,000
Calls in advance = Rs. 25,000
Thus the dividend will be payable by the company on called up capital-calls in arrear which is Rs.
5,00,000 – 40,000 = Rs. 4,60,000
Dividend payable = 15% of 4,60,000 = Rs. 69,000
43. Share forfeiture is the process by which the directors of a company cancel the power of shareholder if
he does not pay his call money when the company demands for it.
When shares issued at par are forfeited the accounting treatment will be as follows:
time of forfeiture.
to such calls which take place when the amount is made due forfeited shares account will be

ANSWERS
Here Mr C paid application money @ Rs.2 per share but did not pay the allotment money so 30 shares
held by him was forfeited.
Thus amount to be transferred to the shares forfeited account will be = 30 × 2 = Rs. 60
Here goodwill is to be calculated on purchase of two years profit.
Profits of last three years are Rs. 43,000; Rs. 38,000 and Rs. 45,000
Average profit = (43,000 + 38,000 + 45,000)/3 = Rs. 42,000
Goodwill = 42,000 × 2 = Rs. 84,000
to buy. If they do not buy, those goods will return to us goods on the ‘sale or return’ basis will not be
treated as normal sales and should be included in the closing inventory unless the sales have been
confirmed by customer . When goods are sent on approval basis then at the end of the financial year the
goods lying with customers will be valued at cost or market price whichever is less.
Here Mohan sent goods costing Rs. 3,500 at profit of 25% on sale to Sohan on sale or return basis of
which Sohan return goods costing Rs. 800. At the year end the remaining goods were neither returned
nor approved by him.
Here as No confirmation has been received from Sohan till 31st Dec, 2011. So the goods will be included
in the closing inventory at cost or market price whichever is lower.
Cost of goods sent by Mohan = Rs. 3,500
Cost of goods returned by Sohan = Rs. 800
So cost of goods still lying with Sohan = 3,500 – 800 = Rs. 2,700
Here A’s acceptance to B for Rs. 2,500 is discharged by a cash payment of Rs. 1,000 and a new bill is
drawn for the balance plus Rs. 50 for interest.
Total amount of the old bill = 2,500

Interest on renewable = Rs. 50
So the amount of the new bill = 1500 + 50 = Rs. 1550
Here A bought goods of the value Rs. 10,000 and consigned them to B to be sold on joint venture
Here the cost of goods sent on consignment = Rs. 10,000 which is the cost of consignment.
A draws bill on B for 80% of the cost of consignment, thus the amount of the bill drawn will be = 80% of
10,000 = Rs. 8,000.
ownership until the goods are sold or person is transferred. Consigning goods at invoice price aims to
achieve the following merchandising objectives:
1. Increase turnover
2. Push old stocks
3. Clear old inventory for new ones
4. Promote another goods (tie up with consigned goods), and
5. Save storage space (producer/distributor pass storage/handling cost to wholesaler/retailer)
Here cost of goods sent on consignment = 1,80,000
Profit = 20% of invoice price
Let the invoice price be x
So profit = 20% of x
And cost of goods = x – 20% of x = 0.8x = 1,80,000
So invoice price = x = 1,80,000/0.8 = Rs. 2,25,000
49. The goods are consigned from one place to another. After receiving the goods by consignee, the goods
are stored by the consignee before selling them to customers. It is natural that some loss to the goods
may take place within that period. The goods may be lost, destroyed or damaged either in transit or in
consignee’s store. The loss which could be avoided by proper planning and care are abnormal loss. They
are like theft, riots, accidents, fire, earthquake etc. These losses could occur in transit or in consignee’s
store and solely to be borne by consignor.
The abnormal loss should be adjusted before ascertaining the result of the consignment. The valuation of
abnormal loss is done on the same basis as the unsold stock is valued.
Here 1,000 typewriters costing Rs. 250 each are sent on consignment basis and Rs. 10,000 is spent for
freight etc., 20 typewriters are damaged in transit beyond repair.

ANSWERS
The cost of the consignment of 1,000 typewriters = 1,000 × 250 + 10,000 = Rs. 2,60,000
The amount of loss = the cost of the 20 typewriters = (2,60,000/1,000) × 20 = Rs. 5,200
consignee’s store. The loss which is caused by unavoidable reasons is known as normal loss. For examples
shrinkage, evaporation, leakage and pilferage. Such losses form part of cost of goods and no additional
adjustment is required for this purpose. The normal loss is borne by goods units. The quantity of such loss
is to be deducted from the total quantity sent by the consignor. The following formula may be used for the
valuation of unsold stock.
Value of closing inventory = (Total value of goods sent/Net quantity received by consignee) X unsold
quantity
Net quantity received = Goods consigned quantity - Normal loss quantity.
Here 1,000 Kg. of Mangoes were consigned to a wholesaler, the cost being Rs. 3 per kg. plus Rs. 400
freight. Loss of 15% of Mangoes is unavoidable i.e. the normal loss and 750 kgs were sold.
Total value of goods sent = 1,000 × 3 + 400 = Rs. 3,400
Net quantity received by the consignee = 1,000 – 15% of 1,000 = 850 kgs
So the remaining inventory is 100 kgs
Value of closing inventory = (3,400/850) × 100 = Rs. 400
Here Cost of the machinery = purchase price + installation expenses = 10,00,000 + 1,00,000 = Rs.
11,00,000
Depreciation = 10% per annum = (11,00,000) × 10% = Rs. 1,10,000
ownership until the goods are sold or person is transferred. Consigning goods at invoice price aims to
achieve the following merchandising objectives: 1. Increase turnover 2. Push old stocks 3. Clear old
inventory for new ones 4. Promote another goods (tie up with consigned goods), and 5. Save storage
space (producer/distributor pass storage/handling cost to wholesaler/retailer)Here cost of goods sent on
consignment = 5,00,000 Profit = 25% of cost price Invoice value = 5,00,000 + 25% of 5,00,000 = Rs.
6,25,000
profit after selling a product or service and deducting the cost associated with its production and sale.Cost
of goods sold is the direct costs attributable to the production or purchase of the goods sold by a company.
It excludes indirect expenses such as distribution costs and sales force cost.Cost of goods sold in the

above case = opening inventory + purchases + carriage-closing inventory = 2,50,000 + 2,00,000 – 50,000
= Rs. 4,00,000. Gross profit = sales-cost of goods sold = 5,00,000 – 4,00,000 = Rs. 1,00,000
54. XYZ & Company employs a team of ten workers who were paid Rs.1,000 each in the yearending 31st
December, 2010. So the total amount of salaries for the year 2010 will be = 10 × 1,000 = Rs. 10,000. At
the start of year 2011, the company raised salaries by 10%. Thus the salaries for the year ended 31st
december 2011 will be = 10,000 + 10% of 10,000 = 11,000.
55. A transaction relating to bank has to be recorded in both the books i.e. Cash Book and Pass Book but
sometimes it happens that a bank transaction is recorded only in one book and not recorded simultaneously
in other book this causes difference in the two balances. To reconcile the balances we prepare bank
reconciliation statement. A Bank reconciliation is a process that explains the difference between the
bank balance shown in an organisation’s bank statement, as supplied by the bank, and the corresponding
amount shown in the organization’s own accounting records at a particular point in time.
Bank reconciliation statement of ABC Enterprise as on 31st March 2012
Balance as per cash book(dr) 10,000
Add:
Cheques issued but not presented for payment 2,000 2,000
Less:
Cheques deposited but not cleared 1,000 (1,000)
________
Balance as per pass book (cr) 11,000
________
56. Closing inventory means the value and quantity of inventory on hand at the end of an accounting period.
Here goods purchased = Rs. 1,00,000
Sales = Rs. 90,000
Gross profit margin = 20% on sales = 20% of 90,000 = Rs. 18,000
Closing inventory = opening in ventory + purchases + gross profit – sales = Nil + 1,00,000 + 18,000 –
90,000 = Rs. 28,000
57. Building improvements are capital events that materially extend the useful life of a building or increase
the value of a building, or both. A building improvement should be capitalized as a betterment and recorded
as an addition of value to the existing building .
Expenditures to be capitalized as improvements to buildings include
• Additions to buildings, such as expansions, extensions, enlargements, etc.
• Installation or upgrade of plumbing and electrical wiring.

ANSWERS
• Installation or upgrade of window or door frames, upgrading of windows or doors, built-in closets
and cabinets, etc.
• Interior renovation associated with casings, baseboards, light fixtures, ceiling trim, etc.
• Exterior renovation, such as installation or replacement of siding, roofing, masonry, etc.
Here Mohan renovates some of the old cabins to increase some space. The amount spent for such
renovation will be capitalized and thus the amount to be charged to profit and loss account will be NIL.
58. Money paid to MTNL Rs. 10,000 is one time payment for installation and this amount will be give benefit
for more than one accounting period. Therefore, this will be treated as an asset.
time of forfeiture.
Here company forfeited 1,000 shares of Rs.10 each held by Mr. John for non-payment of allotment
money of Rs. 4 per share. The called-up value per share was Rs. 8. So the amount debited to share
capital will be = number of shares forfeited × called up value per share = 1,000 × 8 = Rs. 8,000
60. Owner’s capital refers to the sum of the business resources owned by the business owners. It is calculated
through the subtraction of assets from liabilities. When a business pays all its debts, the amount remaining
belongs to the business owner and it is the one that is referred to as Owners Capital or Owners Equity.
Formulas of closing capital :
closing capital =
opening capital + profit OR
opening capital + profit + additional capital – drawings OR
closing assets - closing liabilities
here opening capital = 300000
capital introduction during the year = 200000
drawings = 1500 × 12 = 18000
closing capital = 450000
profit/(loss) for the year = closing capital-opening capital-capital introduced during the year + drawings
= 4,50,000 – 3,00,000 – 2,00,000 + 18,000 = Rs. (32,000) loss.

1. Errors of partial omission effect the trial balance. All others do not effect.
2. Financial statements are part of Accounting and not book-keeping.
3. For depreciation, valuation of inventories and investments, different accounting polices can be adopted.
4. Total of sales book is posted to sales account.
5. Amount of dishonoured bill wrongly debited to general expenses account, is an error of principle.
6. Bank account is personal account as it is in name of individual.
7. Cost of travel of sales manager is deferred revenue as it is incurred to develop new markets and the
benefit will be for more than one year.
8. Advance received from customers is not considered sale due to accural.
9. Income includes received as well as receivable.
10. Mohan Stationers will not debit purchase of stationery in Stationery A/c but it will debit in purchases.
11. Advertisement exepnditure is revenue.
12. Cost of goods sold is calculated by Trading A/c.
13. Amount spent on newly purchased car is debited to car A/c only.
14. Suspense A/c (Dr. balance) in Trial Balance will be recorded in P&L A/c (dr. side) as it is nominal
amount, it will be expensed off.
15. Liability for bill discounted is a contingent liability.
16. Direct expenses of consigneee are added in valuation of consignment inventory.
17. Premium on issue of shares is recoreded on equity and liabilities side of balance sheet.
18. Interest is calculated on face value of securities.
19. Income tax of sole trader is his personal expense.
20. Expense includes expenses payable also as per Accrual concept.
21. The valuation has been done as per conservation in the given case.
22. The given case is of over-subscription, pro-rate allotment and forfeiture of shares.
23. The direct costs attributable to the production of the goods sold by a company. This amount includes the

ANSWERS
cost of the materials used in creating the good along with the direct labor costs used to produce the good.
It excludes indirect expenses such as distribution costs and sales force costs. COGS appears on the
income statement and can be deducted from revenue to calculate a company’s gross margin.
Or opening inventory + purchases – closing inventory
Here cost of goods sold = 3,700 + 20,800 – 2,500 = Rs. 22,000
Where:
Here Cost of the asset = Rs. 25,000
Salvage value = Rs. 1,000
Depreciation = (25,000 – 1,000)/10 = Rs. 2,400
25. The cheques paid by bank recorded twice in Pass Book will be added while preparing Bank Reconciliation
Statement in the given case.
26. In accounting, net profit is equal to the gross profit minus overheads minus interest payable for a given
time period (usually: accounting period). Net profit is gross profit minus all operating costs not included in
the calculation of gross profit, esp wages, overheads, and depreciation.
Here Net profit = gross profit – rent paid – salaries + provision for bad debt + apprentice premium =
50,000 – 6,000 – 5,800 + 2,000 + 4,000 = Rs. 4,4200
27. A trial balance is a list of all the General ledger accounts (both revenue and capital) contained in the
ledger of a business. This list will contain the name of the nominal ledger account and the value of that
nominal ledger account. The value of the nominal ledger will hold either a debit balance value or a credit
balance value. The debit balance values will be listed in the debit column of the trial balance and
the credit value balance will be listed in the credit column. The profit and loss statement and balance
sheet and other financial reports can then be produced using the ledger accounts listed on the trial
balance.

Trial balance of …….as on …..
Particulars l/f Amount (dr) Amount (cr)
Rs. Rs.
Capital (cash + inventory) 31,000
Closing cash 5,000
Opening inventory 11000
Total sales 70,000
Total purchases 50,000
Outstanding trades payables 15,000
Outstanding trades receivables 25,000
Expenses 17,000
Machine 10,000
Outstanding payable for machinery 2,000
_______ _______
Total 1,18,000 1,18,000
_______ _______
28. Omission of posting of discount columns will affect the profits. It is not complete omission.
29. Closing inventory means the value and quantity of inventory on hand at the end of an accounting period.
Here goods purchased = Rs. 1,00,000
Sales = Rs. 90,000
Gross profit margin = 20% on sales = 20% of 90,000 = Rs. 18,000
Closing inventory = opening in ventory + purchases + gross profit – sales = nil + 1,00,000 + 18,000 –
90,000 = Rs. 28,000
In accounting, the bad debt recovery would credit the “bad debts recovered” account and the net amount
of the account is transferred to profit and loss account.Here Mohan paid Rs. 500 towards a debit of
Rs. 2,500, which was written off as bad debt in the previous year which is the case of bad debt recovery.
This bad debt recovery would credit the “bad debts recovered” account by Rs.500 and the net amount
of the account is transferred to profit and loss account.So the bad debt recovered from Mohan will not
effect his account and the correct option is (d).
31. When owner withdraws money from a business for personal expenses it is known as drawings. Drawings
accounting is used when an owner of a business wants to withdraw cash for private use. The bookkeeping
entries are recorded on the drawings account.

ANSWERS
This drawings account is deducted from the capital account. since any amount paid for the personal
expenses for the proprietor from the firm will be treated as drawings, the amount Rs. 1,200 paid for
personal income tax of the proprietor from the petty cash will be treated as drawings and the journal
entry will be Dr. drawings and Cr. Petty Cash Rs. 1,200.
and to putting the asset to use. These costs can include such factors as the purchase price, repairs,
commissions, transportation, appraisals, warranties and installation.
Here an old machine was purchased for Rs. 60,000 then it was repaired for Rs. 5,000 and Rs. 5,000 paid
on its installation.
Thus repairs incurred to bring the old furniture bought to use will be capitalized and will be included in the
total cost of the asset and will not be debited to repairs account.
Correct option is (d)
Formulas of closing capital:
Closing capital =
Opening capital + profit OR
Opening capital + profit + additional capital – drawings OR
Closing assets – closing liabilities
Here opening capital = Rs. 20,000
Borrowings during the year = Rs. 3,000 = loan
Drawings = Rs. 5,000
Profit earned during the year = Rs. 10,000
Closing capital = opening capital + profits – drawings = 20,000 + 10,000 – 5,000 = Rs. 25,000
34. FIFO, which stands for “first-in-first-out,” is an inventory costing method which assumes that the first
items placed in inventory are the first sold. Thus, the inventory at the end of a year consists of the goods
most recently placed in inventory. FIFO is one method used to determine Cost of Goods Sold for a
business. In a period of rising prices, this method yields a higher ending inventory, a lower cost of goods
sold, a higher gross profit (assuming constant price).
Date Particulars Quantity Cost per unit (Rs.) Total cost (Rs.)
March 1 Opening Inventory 15 400 6000
March 4 Purchases 20 450 9000

March 6 Purchases 10 460 4600
March 24 Sales 32 (Opening inventory 15 units @ 400 6000 + 7650 =
15 units + purchases 17 units @ 450 Rs. 13650
on March 4th 17 units)
March 31st Closing inventory 13 3 units @ 450 1350 + 4600 =
10 units @ 460 5950
35. Many times during the operation of business, the owner may take out some cash from the business for
his personal use. These withdrawals from the business are considered as Drawings. Considering the
fact that the business is a separate accounting entity, it charges an interest on the drawings to the owner.
the date the accounts are closed. If the dates on which the amounts are drawn are not given, interest is
calculated on the whole amount on the assumption that the money was drawn evenly throughout the
year. In such case interest will be charged for 6 months.
Here drawings = Rs. 2,400
Interest on drawings = 5% of 2,400 × 6/12 = Rs. 55
Capital as on 31st December 2011:
Opening capital as on 1st Jan 2009 1,00,000
Add profit during the year 10,000
Add further capital introduced during the year 50,000
Less drawings during the year 2,400
Less interest on drawings _______55
st
Closing capital as on 31 Dec 2009 1,57,545
_______
36. The rectifying entry will be to debit purchases and to credit sales and A.
Here the carriage outward is expenses related to sales and will not be included in cost of goods sold and
office rent is also indirect expense and will not be included in cost of goods sold.
Cost of goods sold in the above case = opening inventory + purchases + carriage inward – closing
inventory = 20,000 + 85,800 + 2,300 – 18,000 = 90,100
Gross profit = sales – cost of goods sold = 1,40,700 – 90,100 = Rs. 50,600

ANSWERS
for a new product
price.
Here Invoice value of goods sent out Rs. 2,00,000 and 4/5th of the goods were sold by consignee at
Rs. 1,76,000
The invoice value of the goods sold = 4/5th of 2,00,000 = Rs. 1,60,000
So surplus above the invoice value = 1,76,000 – 1,60,000 = 16,000
Commission on goods sold upto invoice price = 2% of 1,60,000 = Rs. 3,200
Commission on surplus above invoice price@10% = 10% of 16,000 = Rs. 1,600
Here the cost of goods sold = 1,000
Trade discount = 5% of 1,100 = Rs. 55
Thus sales to be recorded = invoice price –trade discount = 1,100 – 55 = Rs. 1,045

Joint venture A/c
To joint bank-land purchased 60,000 By joint bank-sale of land 90,000
To net profit 30,000
_______ _______
60,000
_______ 60,000
_______
41. The retiring partner is entitled to his share of goodwill at the time of retirement because the goodwill
earned by the firm is the result of the efforts of all the partners including the retiring partners. Since a part
of future profits will be accruing because of the present goodwill and the retiring partner will not share
the future profits, it will be fair to compensate the retiring partner for the same. At the time of retirement
of partner the goodwill is evaluated on the basis of agreement among the partners.
Goodwill can only be recorded in the books if some consideration in money or money’s worth is paid for
it. Hence goodwill account cannot be raised.
The adjustment for goodwill will be made through partner’s capital accounts. The following entry is
made:
Continuing partners capital account Dr. (in gaining ratio)
To retiring partners capital account (with his share of goodwill)
Thus the correct option is (b) gaining ratio
in a fixed deposit any time he/she likes with a loss of interest.. He cannot do so with a debenture. The
has been issued. if the debentures were originally issued at a discount and redeemed at premium then the
case of loss on issue of debentures arise.
Here A Co. issued Rs. 1,00,000 12% Debentures at 5% discount, redeemable at 5% premium after 10
years.
The discount on issue of debentures = 5% of 1,00,000 = Rs. 5,000
The premium on redemption of debentures = 5% of 1,00,000 = Rs. 5,000
Thus total loss on issue of debentures = 5,000 + 5,000 = Rs. 10,000
43. Super Profits are the profits earned above the normal profits. Under this method Goodwill is calculated
on the basis of Super Profits i.e. the excess of actual profits over the normal profits. Steps for calculating
Goodwill under this method are given below:

ANSWERS

Here: The capital investment in the firm throughout the above mentioned period has been Rs.1,00,000
and 15% is considered to be a fair return on capital.
Normal profits = 1,00,000 × 15% = Rs. 15,000
Average profit of the last three years = (15,000 + 20,000 + 25,000)/3 = 60,000/3 = Rs. 20,000
Super profits = 20,000 – 15,000 = 5,000
Goodwill = 5000 × 2 = Rs. 10,000
Here A & B are partners in a business sharing profits and losses in the ratio of 7 : 3. They admit C as a
partner. A sacrificed 1/7th share and B sacrificed 1/3rd of his share in favour of C. So the sacrificing ratio
is given.
New profit sharing ratio
Partners Old ratio Old ratio Gain/(sacrifice) New ratio
A 7/10 (1/7 of 7/10) = (1/10) 7/10 – 1/10 = 6/10 = 3/5
D 3/10 (1/3 of 3/10) = (1/10) 3/10 – 1/10 = 2/10 = 1/5
C 1/10 + 1/10 = 2/10 1/5
So the new profit sharing ratio between A : B : C will be 3/5 : 1/5 : 1/5 = 3 : 1 : 1
45. When a company acquires any asset, the purchase consideration can be settled either in cash or in any
way as decided between the seller and the company. It may be settled by issuing shares in the company
or debentures also.
In this problem G Ltd. purchased assets from H Ltd. for a book value of Rs. 7,50,000 and the consideration
was paid by issue of shares of Rs. 100 each at a premium of 25%
The shares are being issued at a premium thus the value of each share issued will be 100 + 25% of 100
= 100 + 25 = Rs. 125
Total value of assets acquired = Rs. 7,50,000
Number of shares issued = total value of assets acquired/value per share = 7,50,000/125 = 6,000 shares

46. The combined capital of A and B = 10,000 + 8,000 = Rs. 18,000
This combined capital constitutes ¾th of the total capital
So total capital of the firm will be = 18,000 × 4/3 = Rs. 24,000
Thus C’s capital will be = 24,000 – 18,000 = Rs. 6,000
C has bought Rs. 8,000 as his share of capital. That means the surplus brought by him is Goodwill
Thus C’s share in Goodwill = 8,000 – 6,000 = Rs. 2000 which is the 1/3 rd of total goodwill.
And the total value of goodwill will be = 2,000 × 3 = Rs. 6,000
Thus repairs incurred to bring the second hand car bought to use and the registration cost together with
dealers commission will be capitalized and will be included in the total cost of the asset .
So the amount debited to the car account will be 15,000 + 1,000 + 500 + 1,200 = Rs. 17,700
Correct option is (a)
48. Sometimes the capital of the new partner is not given. He/she is required to bring an amount proportionate
to his/her share of profit. In such a case, new partner’s capital will be calculated on the basis of adjusted
capital of the existing partners.
Here the capital account of Ramesh and Suresh show the balance of Rs. 1,02,000 and Rs.73,000
respectively.
They admit Mahesh as a new partner for 1/5 share in the profits.
Mahesh’s capital is calculated as follows:
Total share = 1
Mahesh’s share in the profit = 1/5
Remaining share = 1 – 1/5 = 4/5
4/5 share of profit combined capital of Ramesh & Suresh
= Rs. 1,02,000 + Rs. 73,000 = Rs. 1,75,000
Total Capital of the firm = Rs. 1,75,000 × 5/4
= Rs. 2,18,750
Mahesh’s capital for 1/5 share of profits = Rs. 2,18,750 × 1/5 = Rs. 43,750
Mahesh brings in Rs. 43,750 as his Capital

ANSWERS
Bank reconciliation statement of Narayan Enterprises as on 28th Feb 2010
Add:
Cheques issued but not presented for payment 2,150 2,150
Less:
Here the goods are sent to the consignee at cost + 1/6th of invoice price
Cost of goods sent = Rs. 33,000
Let Invoice value of the goods sent = x = 33,000 + 1/6 of x
Or x – 1/6th of x = 33,000
Or 5/6th of x = 33,000
Or x = 33000 × 6/5 = Rs. 39,600
ownership until the goods are sold or person is transferred.
Consignment account
To goods sent on By Naresh A/c-sales 1,80,000
consignment A/c (600 × 300) 1,80,000
To bank- freight paid 6,000 By stock A/c 31,250
To Naresh-octroi and freight 1,500

To Naresh-godown rent and insurance 3,500
To Naresh-commission
(4% of 500 × 350 + 20% of 5000) 8,000
_______ _______
2,11,250 2,11,250
_______ _______
Valuation of closing stock:
Cost of goods consigned = 1,80,000
Add: freight and insurance = 6,000
Add: octroi and cartage = 1,500
Total cost = 1,87,500
Cost of unsold goods = 1,87,500 × 1/6 = 31,250
52. Y A/c
To joint venture a/c 91,000 By joint venture a/c 5,000
By bank a/c 86,000
_______ _______
91,000
_______ 91,000
_______
Joint venture A/c
To purchases-material By Y a/c-bal. fig 91,000
supplied 70,000
To bank-expenses 6,000
X 10,000
Y 5,000
_______ _______
91,000
_______ 91,000
_______
53. After making the Trading and Profit and Loss account of a Partnership firm the next step is to divide the
profits or losses among the partners and to make other appropriations like interest on capital, salary,
commission etc. For this purpose an another account is prepared i.e. profit and Loss appropriation
account.

ANSWERS
This account is prepared to show the division of profit and other appropriations among partners like
salary, commission, interest on capital, interest on drawings etc.
Profit and Loss Appropriation Account
Particulars Rs. Particulars Rs.
To Salaries of Partners 2,500 By Profit and Loss account
To Interest on Partners’ (Profit transferred from P & L account) 15,000
Capitals (3000 + 1800) 4,800
To Commission to manager
(5% of 7,700) 385
To Profit transferred to Partners
capital or current account 7,315
A 3/5 × 7,315 = 4,389
B 2/5 × 7,315 = 2,926
_______ _______
15,000
_______ 15,000
_______
remaining partners. Following is the formula for calculating new ratio:
New ratio = Old ratio – Sacrificing ratio
New ratio
A 5/8 (1/10) 21/40
B 3/8 (1/10) 11/40
C 1/5 1/5
So the new ratio between A : B will be 21/40 : 11/40 = 21 : 11
the firm. And this goodwill will be shared by the old partners in their profit sharing ratio.

Sacrificing ratio = Old ratio – New ratio
New ratio
Partners Old ratio New ratio (Gain)/sacrifice
A 4/9 3/9 1/9
B 3/9 2/9 1/9
C 2/9 2/9 0
Since C is not sacrificing anything. Thus goodwill amount brought by D will be shared by A and B only.
56. Total of balance sheet will be 2,00,000 (20,000 × Rs. 10).
time of forfeiture.
Forfeited shares account will be credited by the amount which has been received in respect of forfeited
shares.
Here total called up value of the shares is 100 × 10 = Rs. 1,000. Thus share capital account will be
debited by Rs. 1,000
Reserve account.
share = 300 × (100 – 80) = Rs. 6,000
amount forfeited per share = 300 × (100 – 25) = 300 × 75 = Rs. 22,500

ANSWERS
to buy. If they do not buy, those goods will return to us goods on the ‘sale or return’ basis will not be
treated as normal sales and should be included in the closing inventory unless the sales have been
confirmed by customer . When goods are sent on approval basis then at the end of the financial year the
goods lying with customers will be valued at cost or market price whichever is less.
Here 100 articles were sent on sale or return basis which were recorded as actual sales on that price.
The sale price was made cost plus 25%.
Firstly this should not be recorded as sales and is to be included in the inventory at cost or market price
whichever is less.
Selling price of goods sent = 100 × 200 = Rs. 20,000
Thus cost price = 20,000 × 100/125 = Rs. 16,000
Thus The amount of inventory on approval will be Rs. 16,000.
60. Dividends payable are dividends that a company’s board of directors has declared to be payable to its
shareholders. Until such time as the company actually pays the shareholders, the cash amount of the
dividend is recorded within a dividends payable account as a current liability. Dividend is not payable on
the calls in arrear.
Here dividend payable will be 10% of (25,00,000 – 10,000) = Rs. 2,49,000

1. Book keeping is not sub-field of Account.

2. Capital brought by proprietor is example of increase in asset and increase in liability.
3. Cost of shifting is deferred revenue expense.
4. Salary payable to clerk is credited to o/s salary A/c.
5. Total of purchase return book is posted to Cr. of Purchases Return A/c.
6. No journal entry is required for normal loss.
7. Inventory is valued at cost or market value, whichever is less, due to conservatism.
8. Account sale is sent by consignee to consignor.
9. If del-credere commission is allowed, bad debts will be borne by consignee and not debited to consignment
A/c.
10. Profit and losses are shared equally unless otherwise agreed.
11. Loss on issue debentures for 5 years is other non-current asset.
12. Dividends are paid as percentage of paid up capital.
13. Balance sheet is prepared as per Part I of Schedule III as per Companies Act, 2013.
14. Damaged inventory is valued at cost or market value whichever is less.
15. Main cause of depreciation is passage of time.
16. ‘By balance b/d’ are written on cr. side in case of cr. balance.
17. Prepaid insurance given in trial balance is recorded in Balance Sheet.
18. Present liability of uncertain amount is provision, if measured reliably by using estimation.
19. Dividends directly collected by bank will be added in the given case.
20. Revenue expenditures are for one year only.
21. Cost concept is being vilated by trader in the given case.
22. Accounting Standards reduce the vagueness and chances of misunderstandings by harmonizing varied
accounting practices.
23. The direct costs attributable to the production of the goods sold by a company. This amount includes the
cost of the materials used in creating the good along with the direct labor costs used to produce the good.

ANSWERS
It excludes indirect expenses such as distribution costs and sales force costs. COGS appear on the
income statement and can be deducted from revenue to calculate a company’s gross margin.
Or opening inventory + purchases + direct expenses– closing inventory
Here cost of goods sold = 8500 + 30700 + 4800 – 9000 = Rs. 35,000
24. Under WDV method, depreciation is charged at a fixed rate every year, on the reducing balance. A
book value, which show a declining balance, weighted for earlier years, and lower and lower for later
Let’s find the WDV as on 1-1-2010 of the plant and machinery in question
Balance of plant and machinery as on 1-1-2010 = 1,47,390
Let Original cost of plant and machinery purchased on 1-1-2007 = x(say)
1-1-2007 Cost of machinery X
31-12-2007 depreciation 15% of x = 0.15x
1-1-2008 wdv x – 0.15x = 0.85x
31-12-2008 depreciation 15% of 0.85x = 0.1275x
1-1-2009 wdv 0.85x – 0.1275x = 0.7225x
1-1-2010 wdv 0.7225x – 0.108375x = 0.614125x =
147390
We got 0.614125 x = 1,47,390
So x = Rs. 2,40,000
Thus cost of machinery on 1.1.2007 will be Rs. 2,40,000.
Cost of goods sold in the above case = purchases during the year + carriage inward + wages – closing
inventory = 19,500 + 400 + 1,000 – 12,000 = 8,900
Gross profit = sales – cost of goods sold = 25,000 – 8,900 = Rs. 16,100

26. Dr. Cr.
COGS 1,50,000
Trade Receivables 60,000
Fixed assets 50,000
Sundry expenses 20,000
Sales 2,00,000
Capital 90,000
Trade payable 30,000
________ ________
3,20,000 3,20,000
________ ________
Total of corrected trial balance will be Rs. 3,20,000.
Thus here installation of machinery will be included in the purchase cost of the asset and the journal entry
will be
Dr. Machinery A/c and Cr. Cash A/c Rs. 20,000
28. Net worth method is also called statement of affairs method or capital comparison method. According to
this method profit or loss of the business is determined by making comparison between the capital of two
dates of a period. If there are other capital related items such as drawing, additional capital, interest on
capital etc. are to be adjusted to ascertain the amount of profit or loss.
These items include:
Drawing: If the drawing is made during the year, it should be added to the amount of closing capital.
Additional capital: If additional capital is introduced in the business during the year, it should be deducted
from the amount of closing capital.
Interest on capital: If the interest is provided on capital, it should be deducted from the amount of
closing capital.
Profit for the year = Closing capital – Opening capital – additional capital + drawings
Profit or loss for the year = 53,600 – 40,000 – 1,000 + 2,400 = 15,000 (profit)
29. Closing inventory is the amount of inventory that a business still has on hand at the end of a reporting
period. This includes raw materials, work-in-process, and goods inventory. The amount of closing inventory
can be ascertained with a physical count of the inventory. It can also be determined by using a perpetual
inventory system and cycle counting to continually adjust inventory records to arrive at ending balances.

ANSWERS
The amount of closing inventory is used to arrive at the cost of goods sold in a periodic inventory system
with the following calculation:
Opening inventory + Purchases – Closing inventory = Cost of goods sold
SO closing inventory = opening inventory + purchases – cost of goods sold
Cost of goods sold = sales –margin on sales = 80,000 – 20% of 80,000 = 64,000
Closing inventory = 1,00,000 – 64,000 = Rs. 36,000
30. Securities premium amount may be applied by the company for all the purposes mentioned in the options
given in the question.
Here dividend payable will be 5% of (4,60,000 – 7,500) = Rs. 22,625
32. The shares issued to promoters will be debited to goodwill account.
33. Number of shares will be calculated as 9,00,000/125 = 7,200.
time of forfeiture.
Here total called up value of the shares is 100 × (3 + 2 + 2) = 700rs. Thus share capital account will be
debited by Rs. 700.
Reserve account.
share = 500 × (10 – 9) = Rs. 500

amount forfeited per share = 500 × (10 – 4) = 500 × 6 = Rs. 3,000.
The surplus amount to be transferred to capital reserve account = 3,000 – 500 = Rs. 2,500.
36. Forfeited share A/c will be credited with total shares × amount received up to the time of forfeiture = 600
× (10 – 2 – 3) = Rs. 3,000.
37. Cheques sent to bank (not collected) will be deducted in the given case.
38. Straight line method depreciates cost evenly throughout the useful life of the fixed asset. Straight line
depreciation is calculated as follows:
Where:
Salvage value = Rs. 500
Depreciation = (5,000 – 500)/10 = Rs. 450
Rate of Depreciation = 450/5,000 × 100 = 9%
39. Cost price is also known as cp is the original price of any item. The cost is the total outlay required to
produce a product or carry out a service. Cost price is used in establishing profitability in the following
ways:
Selling price (excluding tax) less cost results in the profit in money terms.
Here selling price = cost + 60% = Rs. 16,000
Let the cost price be x
Then x + 60% of x = 16,000
Or 1.6x = 16,000
Or x = 16,000/1.6 = Rs. 10,000
40. The sales price (SP) of goods or commodities is the price at which a particular product or commodity is
sold across channels or markets.
Here profit percentage on sales 25%

ANSWERS
Let x be the sale price of goods

Then profit = 25% of x = 0.25x
Cost price = x – 0.25x = 0.75x = 34,200
x = 34,200/0.75 = Rs. 45,600
41. A commission is a fee that a business pays to a manager in exchange for his or her services in either
facilitating or completing a sale. Manager’s commission is calculated in two ways
Manager’s commission = Net Profits X (Percentage of commission / 100)
2. On Profits after charching such commission:
Manager’s commission = Net Profits X (Percentage of commission / 100 + % of commission)
3. Or in any other manner agreed through agreement
Here the managers commission is 5% of sales
Sales = cost + 20% on sales
Let the sales = x
So x = 40,000 + 20% of x
Or 0.8x = 40,000
Or x = Rs. 50,000
So the commission = 5% of 50,000 = Rs. 2,500
42. A commission is a fee that a business pays to a manager in exchange for his or her services in either
facilitating or completing a sale. Manager’s commission is calculated in two ways
Manager’s commission = Net Profits × (Percentage of commission / 100)
2. On Profits after charging such commission:
Manager’s commission = Net Profits × (Percentage of commission / 100 + % of commission)
3. Or in any other manner agreed through agreement
Here gross profit = Rs. 48,000
Net profit = 48,000 – 6,000 = Rs. 42,000
Managers commission = 42,000 × 5/105 = Rs. 2,000

43. Payment of wages is a transaction.
44. Amount of stationery used for own business will be credited to purchases.
45. Rs.
Sale value (4,200 –450) 3,750
Book value (3,000 – 400) 2,600
________
Profit on sale 1,150
________
46. The inventory adjustments in respect of opening and closing inventory appear in the Cost of Goods Sold
as follows:
Opening Inventory
Add: Purchases
Less: Closing Inventory
Cost of Goods Sold
Note that the cost of goods sold is not simply the cost of purchases during the period. This is the
application of the Matching Concept which requires expenses to be recognized against periods from
which associated revenue from the expense is expected to be earned. Therefore, as closing inventory is
not consumed at any given accounting period end, it must not be part of expense which is why it is
deducted from the cost of sale. Similarly, as opening inventory is consumed in the current accounting
period, it must therefore be added to the cost of goods sold.
So here purchases = cost of goods sold + closing inventory – opening inventory = 1,58,600 + 25,400 –
44,000 = Rs. 1,40,000
47. Net worth method is also called statement of affairs method or capital comparison method. According to
this method profit or loss of the business is determined by making comparison between the capital of two
dates of a period. If there are other capital related items such as drawing, additional capital, interest on
capital etc. are to be adjusted to ascertain the amount of profit or loss.
These items include:
Drawing: If the drawing is made during the year, it should be added to the amount of closing capital.
Additional capital: If additional capital is introduced in the business during the year, it should be deducted
from the amount of closing capital.
Interest on capital: If the interest is provided on capital, it should be deducted from the amount of
closing capital.
Closing capital = Profit for the year –income tax + Opening capital + additional capital – drawings +
interest on capital – interest on drawings
Profit or loss for the year = 2,770 – 550 + 5,000 – 650 + 500 – 120 = 6,950 (profit)

ANSWERS
company. It excludes indirect expenses such as distribution costs and sales force cost. Salaries and
wages given here will not be included in cost of goods sold as it is assumed to be an indirect cost.
Cost of goods sold in the above case = opening inventory + purchases during the year + carriage inward
– closing inventory = 9,600 + 11,850 + 200 – 3,500 = 18,150
49. The provision for doubtful debts is identical to the allowance for doubtful accounts. The provision is the
estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet
collected. The provision is used under accrual basis accounting, so that an expense is recognized for
probable bad debts
An increase in provision for bad debts is recorded as follows:
DEBIT the difference (new provision minus old one) to Income Statement
CREDIT provision for bad debts
Here opening Provision for Bad Debts is Rs. 2,500
Closing Provision for Bad Debts = 5% on (trade receivables – bad debts) = 5% on 20,000 = 1,000
Opening provision less bad debts = 2,500 – 1,870 = 630
increase in provision for bad debts = 1,000 – 630 = 370
Provision for bad debts in Profit and Loss A/c will be Rs. 370.
50. Calim receivable will be shown as asset in balance sheet.
Consignment account
To Goods sent on consignment a/c 7,500 By Anil A/c-sales 10,500
To Bank- expenses 600 By Inventory A/C 1,860
To Anil-octroi 1,200
To Anil-commission 775
To Profit on consignment 2,285
_______ _______
12,360
_______ 12,360
_______

Cost of 100 units of goods consigned = 7,500
Add:freight and insurance = 600
Add:octroi and cartage = 1,200
Total cost of 100 units = 9,300
Cost of unsold goods = 9,300 × 20/100 = 1,860
company. It excludes indirect expenses such as operating expenses ,distribution costs and sales force
cost.
Cost of goods sold in the above case = 3,10,000
Gross profit = sales – cost of goods sold = 4,00,000 – 3,10,000 = Rs. 90,000
53. In this case the amount due to retiring partner is paid in instalments. Usually, some amount is paid
immediately on retirement and the balance is transferred to his loan account. This loan is paid in one or
more instalments
The loan amount carries some interest. An instalment consists of two parts :
(i) Principal Amount of instalment due to retiring partner.
(ii) Interest at an agreed rate,
Interest due on loan amount is credited to retiring partners’ loan account. Instalment inclusive of interest
then is paid to the retiring partner as per schedule agreed upon.
Here it was agreed that he should be paid Rs. 4,950 in cash on retirement and the balance in three equal
yearly instalments with interest at 6% per annum.
So the balance will be = 10,950 – 4,950 = Rs. 6000
Amount of three equal instalments = Rs. 6,000/3 = Rs. 2,000
Interest @ 6% pa. = Rs. 6,000× 6/100
= Rs. 360
1st Instalment at the end of 1st Year = Rs. 2,000 + Rs. 360
= Rs. 2,360
Interest @ 6% pa. = Rs. 4,000×6/100 = 240

ANSWERS
2nd Instalment at the end of 2nd Year = 2,000 + 240 = Rs. 2,240
Interest @ 6% pa. = 2,000×6/100 = Rs. 120
3rd Instalment at the end of 3rd Year = 2,000 + 120 = Rs. 2,120
A 5/12 3/6 5/12 – 1/2 = (1/12)
B 4/12 2/6 4/12 – 1/3 = (nil)
C 2/12 1/6 1/12 – 1/6 = nil
D 1/12
So the sacrificing ratio between A:B:C will be 1/12:nil:nil
55. Amount spent on painting new factory is capital expense.
period. This includes raw materials, work-in-process, and goods inventory. The amount of closing inventory
can be ascertained with a physical count of the inventory. It can also be determined by using a perpetual
inventory system and cycle counting to continually adjust inventory records to arrive at ending balances.
The amount of closing inventory is used to arrive at the cost of goods sold in a periodic inventory system
with the following calculation:
Opening inventory + Purchases – Closing inventory = Cost of goods sold
So closing inventory = total goods available for sales – cost of goods sold
Cost of goods sold = x(say) = sales –margin on sales = 13,00,000 – 1/3of x
Or x + 1/3x = 13,00,000
Or 4/3x = 13,00,000
Or x = 13,00,000 × 3/4 = 9,75,000
Closing inventory = 12,00,000 – 9,75,000 = Rs. 2,25,000

57. Step 1
Total all cash received from credit customers during the period. The formula for calculating credit sales
is cash received minus receivables at the start ofthe period, plus receivables at the end of the period.
Step 2
Deduct the total accounts receivable at the start of the period from the cash received from customers.
Step 3
Add amounts owed from customers at the end of the period to the previous figure calculated.
Credit sales = closing receivables + cash received from receivables + bad debts + return inwards –
opening receivables = 13,800 + 30,400 + 2,700 + 1,200 – 10,200 = Rs. 37,900
Total sales = credit sales + cash sales = 28,400 + 37,900 = Rs. 66,300
Trade Receivable A/c
Rs. Rs.
To balance b/d 10,200 By cash 30,400
To credit sales 37,900 By returns 2,700
By bad debts 1,200
By balance c/d 13,800
_______ _______
48,100
_______ 48,100
_______
Total sale = Cash (28,400) + Credit (37,900) = 66,300
58. Let the selling price be x
Thus the profit margin in 20% of x
And the cost price will be x – 20% of x = 80% of x
So the profit margin on cost will be = 20% of x/80% of x × 100 = 0.2x/0.8x × 100 = 25%
59. The 12% debentures are being issued at a premium thus the value of each debenture will be 100 + 10 =
Rs. 110
Total value of building purchased = 99,00,000
Number of debentures issued in consideration = total value of building purchased/value per debenture =
99,00,000/110 = 90,000 debentures
debentures account and the balance amount is the premium
Thus premium amount will be 99,00,000 – 90,00,000 = Rs. 9,00,000

ANSWERS

has been issued. If the debentures were originally issued at a discount and redeemed at premium then the
Here Green Ltd. issued 5,000, 6% debentures of Rs.100 each at a discount of 5% repayable after 5
years at a premium of 5%.

1. Consignment account is nominal.

2. Bank overdraft has credit balance (liability).
3. Customers (Debtors) are acceptors of bills of exchange.
4. Journal proper records opening entries.
5. FIFO is the basis for the sequence mentioned in the question.
6. Closing inventory is shown in trial balance and not opening inventory if adjusted purchase is shown in trial
balance.
7. As per entity concept, business unit is separate from providers of capital.
8. All expenses and receipts of revenue nature go to P&L A/c or Trading A/c.
9. This type of entry is called compound journal entry.
10. Management is internal user. All others are external.
11. In compensating errors, effect of one error is cancelled by effect of some other error.
12. General reserve is transferred to partner’s capital account at time of retirement of partner.
13. Interest on partner’s capital is appropriation and not expense.
14. Noting charges are paid at time of dishonour of bill.
15. Credit note is sent when customer returns goods.
16. A known liability is provision if its amount and due date are indeterminate.
17. Left side is debit side and right side is credit side of an account.
18. Expenses paid but not incurred during current accounting period are prepaid.
19. Profit/loss on realization is shared among partners in old profit sharing ratio.
20. Correct profit will be Rs. 7,70,000 (Rs. 7,00,000 + 1,00,000 less Rs. 30,000).
21. In the given case, capital profit will be rs. 40,000 (1,40,000 – 1,00,000) and revenue profit will be Rs.
60,000 (1,00,000 –40,000).
22. The executor of deceased partner will get share in JLP, reserves, profit up to date of death along with his
capital balance.
23. In case when a bill of exchange matures on a public holiday then the due date will be the preceding
business day.

ANSWERS
In this question A bill of exchange matures on 16th July. It is a public holiday. Bill will mature on the
preceding day i.e. 15 th July.
24. LIFO is not recommended by AS 2.
25. As per balance method, Trial balance will be prepared as follows:
Cash A/c 3,180
Capital 10,000
Bank 6,900
Purchases 725
Sales 950
Salary 5
Rent 150
_______ _______
10,955
_______ 10,955
_______
26. By profit sharing ratio in a partnership firm, we mean the ratio in which the profits and losses of the firm
are to be distributed amongst the partners.
In the absence of a partnership deed and where there is no indication as to the agreement between the
partners in this aspect, it should be considered as equal share for all partners.
Here A B and C shared the profit in the ratio of 2 : 2 : 1
Which is A 18,000 × 2/5 = 7,200
B 18,000 × 2/5 = 7,200
C 18,000 × 1/5 = 3,600
But the correct distribution would have been
A 18,000/3 = 6,000
B 6,000
And C 6,000
So Necessary adjustment will be:
A Dr. 1,200
B Dr. 1,200
To C 2,400

Closing capital =
Here closing assets = inventory + cash at bank + plant and machinery + debtors + investments = 2,400
+ 1,800 + 1,000 + 500 + 2,000 = 7,700
Closing liabilities = bills payable + creditors + loan from Raja Ram = 400 + 800 + 1,500 = 2,700
So capital = Closing assets – closing liabilities = 7,700 – 2,700 = Rs. 5,000
28. Goods used by proprietor for his personal use should be credited to Purchases A/c and debited to
drawings.
29. P&L A/c shows not profit/loss earned by the firm during an accounting period.
30. Trial balance checks arithmatical accuracy of the books and not honesty of book keeper.
31. Capital reserves are credited out of capital profits and not revenue profits. Provisions are charges against
profits. P&L A/c balance is revenue in nature.
Cost of goods sold in the above case = opening inventory + purchases – closing inventory = 4,000 +
20,000 – 3,000 = Rs. 21,000
Profit = sales – cost of goods sold = Rs. 30,000 – 21,000 = Rs. 9,000
33. We know that Credit sales = closing receivables + cash received from receivables + bad debts + return
inwards – opening receivables
Thus cash received from customers = credit sales – closing receivables – bad debts – return inwards +
opening receivables
Here Total sales during the year amounted to Rs. 70,000; Cash sales Rs. 10,000; Balance of trade
receivables at the end of the year Rs. 25,000.
So credit sales = 70,000 – 10,000 = Rs. 60,000
Cash received from customers = 60,000 – 25,000 = Rs. 35,000
34. Machinery is a Capital asset, not to be included in current assets.

ANSWERS
Bank reconciliation statement of …..
Less:
Cheques issued but not presented for payment 1,710 (1,710)
______
Add:
Bank charges 260
______ 1,650
______
______
Balance as per cash book (cr) 6,340
Less:
______
Add:
______ 2,360
______
Balance as per pass book (dr) 6,332
______

Cost of goods sold in the above case = opening inventory + purchases + carriage inward + wages –
goods sent on consignment = 14,500 + 75,995 + 1,700 + 825 – 20,000 = 73,020
38. Sale of plant and machinery is a capital receipt, not reserve.
39. Fixed installment or straight line method depreciates cost evenly throughout the useful life of the fixed
asset.
Where:
Here Cost of the asset as on Jan 1 2007 = Rs. 5,200
Depreciation/year = (5,200 – 200)/10 = Rs. 500
Depreciation for 3 years = 500 × 3 = Rs. 1,500
So balance of furniture account at the end of third year = 5,200 – 1,500 = Rs. 3,700
Thus depreciation to be charged = lease value × the annuity = Rs. 9,996.55
Balance of lease A/C at the end of the first year will be = 60,000 – 9,996.55 = Rs. 50,003.45
41. The defference of trial balance will be credited to suspense account in the given case.
42. When the bill is payable at a stated number of days then the due date will be that day which comes after
adding the specified number of days to the date of the bill plus 3 more days of grace. Note that here the
date of bill is excluded.

ANSWERS
The date of accepting the bill is 8.12.09.

Add 30days will give us 7.01.10
Add 3 days of grace gives us 10.01.10
Thus Jan 10th is the due date.
Formulas of closing capital
Closing capital =
Here opening capital = 16,080
Further introduction of capital = 2,000
Drawings in cash = 3,000
Life insurance premium = 250
Closing capital = 21,925
Closing capital = opening capital + profits – drawings
Profit = closing capital – opening capital + drawings = 21,925 – 16,080 – 2,000 + 3,000 + 250 = Rs. 7,095
(profit)
figure is recorded in the correct head of account. Whatever the reason may be, there is always a chance
of error in the books of accounts. These errors in accounting require rectification. When there is a
difference in a trial balance a suspense account is opened with the amount of the difference so that the
trial balance agrees (pending the discovery and correction of the errors causing the difference).
Here the total of the debit and credit side of a trial balance of Mr. Raja as on 31st March, 2010 were
Rs.20,000 and Rs.10,000 respectively. Thus suspense account will have a credit balance of Rs. 10,000.
Now it was found that the total of sales book was carried forward as 5,000 instead of 4,000 i.e. the sales
account has been overcasted by 1000Rs.Thus we have to debit sales account and credit suspense
account by Rs. 1,000. After crediting suspense account by Rs. 1,000 the balance of suspense account
will be 10,000 (cr) + 1,000 (cr) = Rs. 11,000 (cr).
45. Rectifying entry for the given error will be to debit discount by Rs. 250 with corresponding credit to
suspense a/c.

46. The journal entry to transfer net income to owner’s equity is a debit to Income Summary, and a credit
Capital.
The balance of Income Summary is reduced to zero; the owner’s capital account is increased by the
amount of net income.
The entry will be P/L A/c Dr. Rs. 6,300; To Capital A/c Rs. 6,300
47. Cross profit is difference between sales and cost of goods sold.
48. Credit balance in leger will either be a revenue or a liability not an expense or asset.
Consignment account
To goods sent on 9,00,000 By gita A/c-sales 9,00,000
consignment A/c (1000 × 900)
To bank- freight paid 7,000 By P/L-abnormal loss 45,545
To bank-carriage 650 By inventory A/c 1,84,391
To bank insurance 3,250
To Gita A/c-expenses 13,000
To Gita a/c-commission 54,000
To profit on consignment 1,52,036
_________ _________
Total 11,29,936 Total 11,29,936
_________ _________
Valuation of loss:
Cost of total goods consigned = 9,00,000
Add: Freight = 7,000
Add: Carriage = 650
Add: Insurance = 3,250
Cost of 1000 units = 9,10,900
Thus cost of 50 units = 9,10,900 × 50/1,000 = 45,545
50. Amount spent on structural alteration will be capital in nature. It will be revenue as it is under pressure of
law.

ANSWERS

Profit of the year 1 : 6,000
Profit for the year 2 : 6,000 × 2 = 12,000
Profit for year 3 : 12,000 × 1.5 = 18,000
Average profit of last 3 years = (6,000 + 12,000 + 18,000)/3 = Rs. 12,000
Goodwill = 12,000 × 1 = Rs. 12,000
New ratio
A 3/6 (1/6) 3/6 – 1/6 = 2/6
B 2/6 2/6
C 1/6 1/6
So the new ratio between A : B : C : D will be 1/3 : 1/3 : 1/6 : 1/6
New ratio

A 3/6 5/12 3/6 – 5/12 = 1/12
B 2/6 4/12 2/6 – 4/12 = 0
C 1/6 2/12 1/6 – 1/6 = 0
D 1/12
So the sacrificing ratio between A : B : C will be 1/12 : nil : nil
54. Joint venture A/c
To Joint bank-purchases 66,600 By joint bank-sales 89,000
To Joint bank-expenses 6,629
To C-commission 5,340
To Net profit transferred
to-ABC 10,431
_________ _________
89,000 89,000
_________ _________
55. Here Gopal was holding 100 shares of 10 each of a company on which he had paid Rs. 3 on application
and Rs. 2 allotment, but could not pay Rs. 2 on first call.
So amount received per share = 3 + 2 = 5
Here total amount received for the shares is 100 × 5 = Rs. 500. Thus Forfeited shares a/c will be credited
with Rs. 500.
56. Consignment inventory will be recorded in consignor’s balance sheet at invoice value less stock reserve
on it.
57. Insurance charges will not be included in the cost of inventory. The charges till the point of arrival in
consignee’s godown will only be considered.
58. When a company acquires any business, the purchase consideration can be settled either in cash or in
any way as decided between the seller and the company. It may be settled by issuing shares in the
company or debentures also.
In this problem X Ltd. purchased the business of Y Ltd. for Rs. 90,000 payable in fully paid shares of 10
each; shares were issued at a premium of 25%.
The shares are being issued at a premium thus the value of each share issued will be 10 + 25% of 10 =
10 + 2.5 = Rs. 12.5
Total value of business acquired = Rs. 90,000
Number of shares issued = total value of business acquired/value per share = 90,000/12.5 = 7,200 shares.

ANSWERS
59. Here a company on non-receipt of First Call money of Rs. 2 per share and Final Call money of Rs. 3 per
share from Rahul, debited Call-in-Arrears account by Rs. 2,000 and Rs. 3,000 respectively. After due
notice 1,000 shares of Rs.10 each were forfeited from Rahul.
Since already the amount due on forfeited shares has been transferred to ‘Unpaid Calls A/c’.
So the amount to be credited to First Call Account at the time of entry for forfeiture will be NIL.
or debentures also.
In this problem X Ltd. purchased Plant and machinery of Rs. 20,00,000 at Rs. 18,00,000; Land and
building of Rs. 30,00,000 at Rs. 42,00,000 for purchase consideration of Rs. 55,00,000 and paid Rs. 10,00,000
in cash and remaining by issue of 8% debentures of 100 each at a premium of 20%.
Total consideration to be paid = Rs. 55,00,000
Consideration paid in cash = 10,00,000
Consideration to be paid by issue of debentures = Rs. 45,00,000
The debentures are being issued at a premium thus the value of each debentures issued will be 100 +
20% of 100 = 100 + 20 = Rs. 120
Number of debentures issued = total value of assets acquired/value per debenture = 45,00,000/120 =
37,500 debentures.

1. Commission received in advance will have credit balance as it is liability.

2. Insurance unexpired is a personal account (belonging to Insurance company).
3. Purchase is transaction and loader’s existence as on 31st March, 2010 is an event.
4. Stock outflow is in both cases — sales and consignment.
5. The correct order is Journal Entries, Ledger positngs, P&L A/c and preparation of balance sheet.
6. Rs. 112 need to be subtracted while preparing Bank Reconciliation to arrive at the balance as per pass-
book.
7. Bills receivable is a current asset. It is not fixed, fictitious and intangible.
8. Loan to contractor (receivable) will have a debit balance. All others will be having credit balances.
9. Wages paid to Ram debited wrongly to his account is an error of principle. All others are errors of
commission.
10. the maturity date will be 93 (90 + 3 days of grace) days after 26.2.2010. Thus 30.5.2010 will be maturity
date.
11. Balance of goods sent on consignment A/c is transferred to Trading A/c. all purchases, sales and transfers
of goods are recorded in Treading A/c.
12. Memorandum joint venture is prepared in case each co-venturer wants to keep records of their own
transactions of joint venture.
13. If an estimate of probable outflow of resources for settlement of present obligation can be made, it is
recognised as contingent liability not provision.
14. The party who sends goods is consignor and to whom goods are sent is consignee.
15. Any additional amount is premium for goodwill.
16. Drawer i.e. the payee does discounting, endorsement and collection of bills.
17. Sales return are reduced from sales to arrive at net sales.
18. Drawings are deducted from capital balance of owners.
19. Closing inventory (if given in Trial balance) will appear only in Balance Sheet and not in Trading A/c.
20. Purchase of fixed asset is recorded in journal proper. Purchase of goods (in trade) on credit basis are
recorded in purchase book.

ANSWERS
21. Securities premium is not free for distribution as dividend. It can be used for all other purposes.
22. Sale will be presumed to have been made at time of delivery of goods and not production of goods or
receipt of order.
The date of drawing the bill is 25th Jan
Add 45 days will give us 11th of March
Add 3 days of grace gives us 14th of March
Thus March 14th is the due date.
Here Total amount of the Satyapal’s acceptance = 5,000
Interest for 1 months @12% pa = Rs. 5,000 × 12/100 × 1/12 = 50
Total amount of the renewed bill = 5,000 + 50 = Rs. 5,050
25. Retiring a bill means making payment before the date of maturity. When the acceptor of a bill is prepared
to make the payment of the bill before the due date, he may ask the holder to accept the payment,
provided he receives some rebate or discount for the unexpired period. Such a rebate or discount is an
expense to the party receiving the payment and gain to the party making the payment.
Here Preet accepted a 90 days bill of Rs. 10,000 drawn by Jeet on 05.02.2010. On 13.03.2010, Preet
wished to retire the bill. Jeet offered rebate @ 12% p.a.
So the due date of the bill is 6th may
The bill was retired on 13.3.2010
So the period for which rebate will be allowed = 54 days
The rebate = 10,000 × 12% × 54/360 = Rs. 180

Consignment Account
To Goods sent on consignment By Consignee A/c (Sales) 1,50,000
(at cost price) 1,00,000 × 100/125 80,000 By Inventory at cost
To Consignee’s A/c(indirect expenses) 40,000 Price 10,000 × 100/125 8,000
To Profit 38,000
______ ______
1,58,000
______ 1,58,000
______
27. The abnormal loss should be adjusted before ascertaining the result of the consignment. The valuation of
Here X consigned 100 packets of cosmetics each costing Rs. 300 to his agent at Bareilly. He paid Rs. 500
towards freight and insurance. 15 packets were destroyed in the way. So this is abnormal loss.
Valuation of damage
Cost of 100 packets sent = 30,000
Total cost of 100 packets sent = 30,500
So the cost of 15 packets destroyed = 30,500 × 15/100 = Rs. 4,575
28. Here X consigned 100 packets of cosmetics each costing Rs. 300 to his agent at Bareilly. He paid Rs. 500
towards freight and insurance. 15 packets were destroyed in the way. So this is abnormal loss.
Valuation of damage
Cost of 100 packets sent = 30,000
So the cost of 15 packets destroyed = 30,500 × 15/100 = Rs. 4,575
Value of Stock just before being unloaded at the consignees godown
= Cost of Goods + Consignors Direct Expenses + Proportionate Consignee Direct Expenses
The cost of the goods/stock implies the value at which the goods are consigned by the consignor to the
consignee. Since the goods have reached the consignees godown, we can consider the consignor expenses
on the goods to have been incurred. Moreover any direct expenses incurred by the consignee in relation
to the transportation of the goods, octroi duties, insurance in transit etc., would also have to be considered
as having been incurred on the goods.

ANSWERS
Therefore, the direct expenses incurred till that point would include the consignor expenses and that part
of the consignee expenses which relate to the expenses incurred on the stock before being unloaded.
Now the cost of the 85 packets received by the consignee = 30,500 – 4,575 = Rs. 25,925
Add: Clearing charges = 1,000
Total cost = 26,925
Total units sold = 70 units
Units remaining in inventory = 15 packets
So the value of inventory = 26,925 × 15/85 = Rs. 4,751
29. Joint venture A/c
To Elder-goods 2,500 By Large-sales 6000
To Elder-expenses 200
To Large-goods 2,000
To Large-expenses 150
To Large-commission 300
To Net profit 850
______ ______
6,000
______ 6,000
______
30. Here Hardcore Computers Ltd. issued to public 15,000 shares of Rs. 10 each at a premium of Rs. 2.
Applications were received for 10,000 shares. The amount payable was as follows:
On application Rs. 3 per share
On allotment Rs. 4 per share (including premium)
On first and final call Rs. 5 per share
Mr. Perfect holder of 100 shares did not pay allotment and call money. The company forfeited all the
shares of Mr. Perfect.
The amount called up per share = 3 + 2 + 5 = Rs. 10
Total amount called up for the forfeited shares = 100 × 10 = Rs. 1,000
So Share Capital a/c will be debited by Rs. 1,000.

Joint venture A/c
To joint bank-material 1,62,000 By joint bank-contract price 2,00,000
To joint bank-wages paid 60,000 By B-drawings 6,000
By loss on joint venture 16,000
______ ______
2,22,000 2,22,000
______ ______
32. Here J and R are equal partners U is admitted as a partner for ¼ share of profits but is unable to
contribute premium for goodwill in cash amounting to Rs. 8,000 and so it is decided to raise a loan A/c in
the name of U. So here U’s loan will be raised for crediting goodwill to sacrificing partners loan account.
Journal entry will be
U’s Loan A/c Dr. 8,000
To J 4,000
To R 4,000
New ratio = old ratio + gaining ratio
Partners Old ratio Gaining ratio New ratio
Amit 5/12 4/7 of 3/12 = 12/84 5/12 + 12/84 = 47/84
Rohit 4/12 3/7 of 3/12 = 9/84 4/12 + 9/84 = 37/84
Thus the new ratio between Amit and Rohit will be 47 : 37.

ANSWERS
Calculation of new profit sharing ratio
Partners Old ratio Gaining ratio New ratio
Rachna ½ 1/3 × 1/2 = (1/6) ½ – 1/6 = 2/6 = 1/3
Sapna ½ 1/3 × 1/2 = (1/6) ½ – 1/6 = 2/6 = 1/3
Ashna 1/3 1/3
Thus the new ratio between Rachna,Sapna and Ashna = 1 : 1 : 1
profits. After arriving at the capitalized average profit, Capital employed (assets – liabilities) of the firm
is then subtracted from the capitalized value of average profits to arrive at the Goodwill,. To calculate
Mathematically, Capitalized Value of Average Profits = Average Profits × (100 / Normal Rate of Return)
Here profit for the year = 12,00,000
Thus capitalized value of profit = 12,00,000 × 100/15 = 80,00,000
Thus Goodwill = 80,00,000 – 80,00,000 = NIL.
Cost of goods sold in the above case = Rs. 30,000
Profit = sales – cost of goods sold = 40,000 – 30,000 = Rs. 10,000
37. Bank reconciliation statement of …..

Less:
Add:
Cheque deposited but not credited 3,000 3,000
______
______
38. To write off the trade payables, we will charge the amount to P&L A/c with corresponding credit to
suppliers.
39. Net salary account is the salary payable account which is paid to employee. The entry will be basic
salary account Dr. 50,000
Income tax Cr. 1,000
professional tax Cr. 200
EPF Cr. 2,000
SWF Cr. 100
Recovery of Loan Cr. 1,700
Salary payable account Cr. 45,000
So salary account will be debited by Rs. 50000
40. Dividend A/c will be credited with gross amount of Rs. 10,000 (9,200 + 800).
41. Purchases was under casted thus profit was overcasted resulting in distribution of overcasted profit
among partners. Thus partner’s capital accounts are overcasted. Again since purchases are not booked
trade payables are also under casted.
So for rectification following entry will be passed:
A’s Capital Dr. 20,000
B’s Capital Dr. 20,000
C’s Capital Dr. 20,000
To Suppliers (creditors) A/c 60,000
42. Dismantling and demolition charges are revenue in nature.

ANSWERS
Here there was an error in the trial balance. Difference was put to Suspense A/c. Later on, it was found
that the opening inventory of Rs. 1,080 was brought into the books as Rs. 1,800.
Thus the suspense a/c has a credit balance of Rs. 720 i.e. the difference.
So the rectification entry to be passed will be
Suspense A/c Dr. 720
To Opening inventory 720
44. Under average profit method goodwill is calculated on the basis of the average of some agreed number
of past years. The average is then multiplied by the agreed number of years. This is the simplest and the
most commonly used method of the valuation of goodwill.
Profit of the year 2006: 40,000
Profit for the year 2007: 50,000
Profit for year 2008: 60,000
Profit for the year 2009: 50,000
Average profit of last 4 years = (40,000 + 50,000 + 60,000 + 50,000)/4 = Rs. 50,000
Goodwill = 50,000 × 3 = Rs. 1,50,000
or debentures also. In this problem G Ltd. purchased assets from AB Ltd. for a book value of Rs. 1,50,000
and the consideration was paid by issue of shares of Rs. 10 each at a premium of Rs. 5. The shares are
being issued at a premium thus the value of each share issued will be 10 + 5 = Rs. 15. Total value of
assets acquired = Rs. 1,50,000 Number of shares issued = total value of assets acquired/value per share
= 1,50,000/15 = 10,000 shares.
46. Under WDV method, depreciation is charged at a fixed rate every year, ON THE REDUCING
BALANCE. A certain percentage is applied to the previous year’s book value, to arrive at the current
year’s depreciation/ book value, WHICH SHOW A DECLINING BALANCE, WEIGHTED FOR
EARLIER YEARS, AND LOWER AND LOWER FOR LATER YEARS, as the asset grows older.
Let’s find the WDV as on the end of the third year of the furniture in question
Balance of furniture as on 1.1.2006 = 10,000
1-1-2006 Cost of machinery 10,000
31-12-2006 Depreciation 25% of 10,000 = 2,500
1-1-2007 WDV 7,500
31-12-2007 Depreciation 1,875

1-1-2008 WDV 5,625
31-12-2008 Depreciation 1,406
1-1-2009 WDV 4,219
At the end of the third year it was sold for Rs. 1,000.
Loss on sale will be wdv – sale proceeds = 4,219 – 1,000 = Rs. 3,219
47. Under WDV method, depreciation is charged at a fixed rate every year, ON THE REDUCING
BALANCE. A certain percentage is applied to the previous year’s book value, to arrive at the current
year’s depreciation/ book value, WHICH SHOW A DECLINING BALANCE, WEIGHTED FOR
EARLIER YEARS, AND LOWER AND LOWER FOR LATER YEARS, as the asset grows older.
Balance of plant and machinery as on 1-1-2009 = 1,47,390
Let Original cost of plant and machinery purchased on 1-1-2006 = x (say)
31-12-2006 Depreciation 15% of x = 0.15x
1-1-2007 WDV x-0.15x = 0.85x
31-12-2007 Depreciation 15% of 0.85x = 0.1275x
1-1-2008 WDV 0.85x – 0.1275x = 0.7225x
31-12-2008 Depreciation 15% of 0.7225x = 0.108375x
1-1-2009 WDV 0.7225x – 0.108375x = 0.614125x = 147390
We got 0.614125 x = 1,47,390
So x = Rs. 2,40,000
Thus Cost of machinery on 1.1.2007 will be Rs. 2,40,000.
Manager’s commission = Net Profits × (Percentage of commission /100 + % of commission)
Here the managers commission is 10% of net profit after charging such commission
So the managers commission will be = 22,000 × (10/110) = Rs. 2,000

ANSWERS

in a fixed deposit any time he/she likes with a loss of interest. He cannot do so with a debenture. The
Here X Co. issued Rs. 1,00,000 Debentures at 4% discount, redeemable at 6% premium after 10 years.
The discount on issue of debentures = 4% of 1,00,00,000 = Rs. 4,00,000
The premium on redemption of debentures = 6% of 1,00,00,000 = Rs. 6,00,000
Thus total loss on issue of debentures = 4,00,000 + 6,00,000 = Rs. 10,00,000
50. Interest on drawings is also charged like interest on capital, if it is provided in the partnership agreement.
Since drawings are affected by partners often in irregular amounts and on varying dates, it is considered
advisable to calculate interest on drawings to adjust the rights of partners. In many cases, however,
drawings are made by mutual agreement and no interest is charged at all.
the date the accounts are closed.
Calculation of interest on drawings
Date of drawings Number of months Amount
Feb 1 11 12,000
Apr 30 8 6,000
Jun 30 6 9,000
Aug 31 4 12,000
Oct 1 3 8,000
Dec 31 0 7,000
12,000 × 11 + 6,000 × 8 + 9,000 × 6 + 12,000 × 4 + 8,000 × 3 × 9/100 × 1/12
51. Interest on capital is allowed to the owner on the concept of separate entity where the capital invested in
the business is considered to be the loan from the proprietor.
Here Interest on capital at 6% p.a. is to be allowed. Capital in the beginning was Rs. 3,00,000.
Interest amount will be 6% of 3,00,000 = Rs. 18,000
52. The monetary value of an asset decreases over time due to use, wear and tear or obsolescence. This
decrease is measured as depreciation.

Calculation of depreciation
Assets Value Depreciation rate Depreciation
Office furniture 8,000 5% 400
Plant and machinery 80,000 10% 8,000
Factory building 2,00,000 5% 10,000
Total 18,400
53. Gaining ratio is calculated when a partner retires/dies.
Reserve account.
share = 100 × 3 = Rs. 300
amount forfeited per share = 100 × (10 – 2) = 100 × 8 = Rs. 800
55. In this problem Z Ltd. purchased land and building from H Ltd. for a book value of Rs. 2,00,000 and the
consideration was paid as Rs. 65,000 in cash and the balance by issue of 6% Debentures of Rs. 1,000
each at a discount of 10%
the debentures are being issued at a discount thus the value of each share issued will be 1,000 – 10% of
1,000 = 1,000 – 100 = Rs. 900
Total value of land and building acquired = Rs. 2,00,000
Cash paid = 65,000
Balance to be paid by issue of debentures = 1,35,000
Number of debentures issued = total value of assets acquired/value per debenture = 1,35,000/900 = 150
debentures
Discount on issue of debentures will be 150 × 100 = Rs. 15,000
56. For recording unrecorded investment in the faks, the entry will be debit investment by giving credit to
Revaluation A/c.

ANSWERS
57. The amount of debenture discount can be written off in two ways :
1. All debentures are to be redeemed after a fixed period. When the debentures are to be redeemed
after a fixed period, the amount of discount will be distributed equally within the number of years
spreaded between the issue of debentures and their redemption. The amount of discount on issue of
debentures to be written off each year is calculated as
Amount of discount to be written off annually
= Total amount of Discount/Number of years
2. Debentures are redeemed in instalments. Debentures may also be redeemed in instalments but over
a fixed period. In that case the amount of debenture discount will be written off each year in
proportion to the amount of debentures redeemed.
Here company issued debentures of the face value of Rs. 1,00,000 at a discount of 6% on Jan. 1,
2009. These debentures are redeemable by annual drawings of Rs. 20,000 made on 31st Dec.
each year. The directors decided to write off discount based on the debentures outstanding each
year.
Total discount = 6% of 1,00,000 = Rs. 6,000.
Calculation of discount to be written off every year
Date Debentures to be redeemed Discount written off
31.12.2009 1,00,000 6000 × 5/15 = 2000
31.12.2010 80,000 6000 × 4/15 = 1600
31.12.2011 60,000 6000 × 3/15 = 1200
31.12.2012 40,000 6000 × 2/15 = 800
31.12.2013 20,000 6000 × 1/15 = 400
Reserve account.
share = (250 × 10 – 2000) = Rs. 500
amount forfeited per share = 250 × (10 – 7) = 250 – 3 = Rs. 750

individuals/institutions who lend it money (invest in their debentures). For an investor investing in a
debenture is just like investing in a fixed deposit with the difference that while he can withdraw the
amount invested in a fixed deposit any time he/she likes with a loss of interest.. He cannot do so with a
debenture. The amount invested on a debenture will be repaid only on the expiry of the period for which
the debenture has been issued. If the debentures were originally issued at a discount and redeemed at
premium then the case of loss on issue of debentures arise.
Here a Co. issued Rs. 2,00,000 Debentures at 5% discount, redeemable at 10% premium after 10 years.
60. Any partner paying firms liability out of his private funds will be treated as capital introduction by that
partner. Here A, B & C are partners sharing profits & losses in equal ratio. A paid firm’s liability of
Rs. 10,000 out of his private funds.
So the entry to record this transaction will be
Liability A/c Dr. Rs. 10,000
To A’s Capital Rs. 10,000

ANSWERS

1. It would be convenient to record the tranaction in Bills payable book if firm makes numerous promissory
notes.
2. Carriage outward is debited to P&L A/c but carriage inward is debited to Trading A/c.
3. The expenditure should be capitalized as it is necessary for construction of Cinema house.
4. Material and wages for erection of machinery should be debited to Machinery A/c.
5. Difference in trial balance is transferred to suspense A/c.
6. Capital is difference of assets and liabilities.
7. Wages o/s is a liability and has credit balance.
8. Profits and losses are shared equally unless otherwise agreed among partners.
9. In case of debt becoming bad, the amount should be debited (not credited) to bad debts.
10. The opening entry will be to recognise prepaid insurance (2,400 × 9/12) i.e. Rs. 1,800. Thus entry will be
debit insurance premium by giving corresponding credit to prepaid account.
11. Accomodation bills are drawn to finance the parties.
12. Payment of tax under dispute is contingent liability.
13. Consignee will debit bad debts amount to his commission as he has to bear bad debts in case of del-
credere commission.
14. 6% is the rate as per Partnership Act.
15. Dividends are paid up on paid up capital.
16. Posting means writing of transaction in leger.
17. Commission to promote credit sales is Del-credere commission.
18. Joint Venture a/c is a nominal A/c as it shows the profit/loss on joint venture.
19. In ledger, there are 8 columns (4 on Dr. and 4 on Cr. side).
20. The error would effect both Plant and Carriage accounts.
21. Cost concept has been violated in the given case.
22. Journal entry will be to debit computer by 11,500, bad debts by Rs. 13,500 (25,000 – 11,500) by giving
corresponding credit to A.

Here Sharma of Allahabad sends goods costing Rs. 1,00,000 at an invoice price of the Rs. 1,20,000 to
Kalapil of Katak. Sharma incurs some expenditure in relation to such consignment:
1/10th of the consignment is damaged in transit.
The cost of the consignment = 100000 + 5000 + 10000 + 5000 = 120000
The amount of loss = 1/10 of 120000 = Rs. 12,000.
Consignment account
To goods sent on By Naresh A/c-sales 1,80,000
consignment A/c (600 × 300) 1,80,000
To bank- freight paid 6,000 By stock A/c 31,250
To Naresh-octroi and freight 1,500
To Naresh-godown rent
and insurance 3,500
To Naresh-commission (4% of
500 × 350 + 20% of 5,000) 8,000
_______ _______
2,11,250 2,11,250
_______ _______
Cost of goods consigned = 1,80,000
Add: freight and insurance = 6,000
Add: octroi and cartage = 1,500
Total cost = 1,87,500
Cost of unsold goods = 1,87,500 × 1/6 = 31,250

ANSWERS
asset.
Where:
Here Cost of the asset = Rs. 1,26,000
Depreciation/year = (1,26,000 – 6,000)/6 = Rs. 20,000
26. Accural concept states that all expenses due (wheather paid or not) should be provided for in the
accounting period.
27. Under diminishing balance method, depreciation decreases every year.
28. LIFO is based on the issues as per latest prices i.e. current replacement cost.
29. Balance sheet represents assets = liabilities and capital.
30. Total of purchase book is posted in purchases A/c.
31. Legal expenses for a suit for breech of contract of goods is revenue expenditure.
32. Capital is needed to create a balance between assets and liabilities. capital is the difference between the
liabilities and assets.
Opening capital = opening assets – opening liabilities
Here assets = cash in hand + cash at bank + inventory + land and building + plant and machinery +
prepaid insurance + owing from Mr X = 1,000 + 5,000 + 20,000 + 1,00,000 + 50,000 + 12,500 + 500 = Rs.
1,89,000
And liabilities = owing to Z Ltd. + interest received in advance = 3,750 + 250 = 4,000
So capital = 1,89,000 – 4,000 = Rs. 1,85,000
33. Sales returns book is also called returns inwards book. It is used for recording goods returned to us by
our customers.

Sales Returns Book
Date Particulars C/N L.F. Amount
Jan 17 Goyal & Co 250
Jan. 10 Garf & Co. 100
Jan. 17 Mittal and Co. 650
______
1,000
______
Note: Since Jindal & co. are saree dealers the return of typewriter is not related to trade and so will not
find place in the sales return book.
34. Preparing a trial balance for a company serves to detect any mathematical errors that have occurred in
the double-entry accounting system. Provided the total debits equal the total credits, the trial balance is
considered to be balanced, and there should be no mathematical errors in the ledgers.
Corrected trial balance
Dr. Balance (Rs.) Cr Balance (Rs.)
Sen Gupta’s Capital – 1,556
Sen Gupta’s Drawings 564 –
Leasehold premises 750 –
Sales – 2,750
Dues from customers 530
Purchases 1,259
Purchases return 264
Loan from Bank 256
Trade payables 528
Trade expenses 700
Cash at Bank 226
Bills payable 100
Salaries and wages 600
‘Opening inventory 264
Rent and taxes 463
Sales return 98
_____ _____
Total 5,454
_____ 5,454
_____

ANSWERS
35. Whenever a company redeems its preference shares then the nominal value or face value of the shares is
put into capital redemption reserve fund. There after this fund becomes the part of the paid capital of the
company.
Capital Redemption Revere is also created when a company buys it owns shares which reduce its share
capital.
The capital redemption reserve fund is transferred from undistributed profits i.e general reserves, profit
or loss account.
A redeemable preference share can be redeemed entirely out of fresh issue of new preference or equity
shares but not debentures.
Here the face value of the 10% Redeemable preference shares to be redeemed = 10000 × 100 =
1000000
Face value of the fresh equity shares issued for the purpose = 1000000
Thus amount to be transferred to the Capital Redemption Reserve Account = 1000000 – 1000000 = nil
36. The benefit of Rs. 500 earned by Ritesh should be credited to discount received account (income).
37. In case of normal loss, the loss is spread over the entire lot of good units, no entry is required.
38. The amount of loss will be Rs. 6,00,000 only as it is restricted to the amount of insured value.
Cost of goods sold = opening inventory + purchases – closing inventory
Thus purchases = cost of goods sold + closing inventory – opening inventory = 80,700 + 6,000 – 5,800 =
Rs. 80,900
Cost of goods sold = opening inventory + purchases + direct expenses – closing inventory
Cost of goods sold = 8,500 + 30,700 + 4,800 – 9,000 = Rs. 35,000

Cost of goods sold in the above case = 70,800
Profit = sales – cost of goods sold = 1,30,200 – 70,800 = Rs. 59,400
company. It excludes indirect expenses such as distribution costs and sales force cost. In the above case
lets find out gross profit with the help of trading account.
Trading account as on…
To Opening inventory 2,400 By SalesLess return 20,000
To PurchasesLess returns 15,020 By Loss due to fire 1,000
To Carriage inward 524 By Closing inventory 3,840
To Manufacturing wages 2,800
Add: Outstanding 96 2,896
_____
______ ______
Total 24,840
______ Total 24,840
______
43. The balance sheet equation is that total assets equals liabilities plus owner’s equity. Looking at the
equation in this way shows how assets were financed: either by borrowing money (liability) or by using
the owner’s money (owner’s or shareholders’ equity).
Thus total of balance sheet will be equal to total of all assets or total of liabilities plus owner’s equity.
Total assets = cash in hand + prepaid expenses + cash at bank + inventories + investments + bills
receivables = 1,24,000 + 2,000 + 2,90,000 + 16,000 + 2,000 + 80,000 = Rs. 5,14,000
Here Depreciation on motor car, whose cost is Rs. 58,000 with an accumulated depreciation reserve of
Rs.11,600, at 20% p.a. on diminishing balance will be = 20% of (58,000 – 11,600) = Rs. 9,280
probable bad debts

ANSWERS
An increase in provision for bad debts is recorded as follows

DEBIT the difference (new provision minus old one) to Income Statement ×
Closing Provision for Bad Debts = 5% on (trade receivables – bad debts) = 5% on 10,000 = 500
Opening provision less bad debts = 1,250 – 300 = 950
Decrease in provision for bad debts = 950 – 500 = 450
Provision for bad debts credited to Profit and Loss A/c will be Rs. 450.
46. In units of production method of depreciation, depreciation is charged according to the actual usage of
the asset. In units of production method, higher depreciation is charged when their is higher activity and
less is charged when there is low level of operation. Zero depreciation is charged when the asset is idle
for the whole period. The following formula is used to calculate depreciation under this method:
Number of Units Produced

Depreciation = × (Cost – Salvage Value)
Life in Number of Units
Life in Number of Units

Here Number of Units Produced in 1-3 years = 5 + 5 + 5 = 15 lakhs
Life in number of units = 30 lakhs
Cost of the machine = 11,00,000
Salvage value = nil
So depreciation for 1-3 year will be = (5 + 5 + 5)/30 × (11,00,000) = Rs. 5,00,000
Depreciation for one year = 1,83,333
47. A joint venture takes place when two parties come together to take on one project.
Here we can find out Profit on venture with the help of B account in the books of A and the joint venture
account
Joint venture A/c
To bank A/c-purchase 2,00,000 By B A/c-sales 2,50,000
To bank- expenses 2,000
To bills receivable-
discounting charges 5,000

To B A/C-expenses 3,000
To B A/c-commission 25,000
To A A/c-interest on capital 12,000
To P/L-profit 3,000
________ ________
2,50,000 2,50,000
________ ________
B A/C
To joint venture A/c 2,50,000 By bills receivable 1,00,000
By joint venture A/c-expenses 3,000
By joint venture-commission 25,000
By balance c/d-balance
receivable 1,22,000
________ ________
2,50,000 2,50,000
________ ________
48. For rectifiction, Ajit needs to be debited by Rs. 500 with corresponding credit to Bad debts
recovered.
Here cheques issued for payment Rs. 400 was wrongly credited by Bank as Rs. 900. If the balance as
pr cash book is the starting point then in the bank reconciliation statement cash balance will be added by
400 + 900 = Rs. 1,300
Add:
Cheques deposited in the Bank but not recorded in Cash Book Rs. 100 100 100

ANSWERS
Add:
Cheques drawn but not presented for payment 6,000 6,000
Bank charges recorded twice in cash book 30
________
________
account.
To karan’s capital a/c-Salaries of By Profit and Loss account
Partner (Karan) 3,000 (Profit transferred from P & L account) 8,848
To Interest on Partners’ To interest on drawings (64 + 88) 152
Capitals (1,200 + 800) 2,000
To Profit transferred to Partners
Ratan
Karan
________ ________
9,000 9,000
________ ________
Note: Calculation of interest on drawings
Ratan
Date of drawings Number of months Amount Interest @8%
Jun 30 9 600 36
Sept 30 6 500 20
Dec 31 3 400 8

Karan
Date of drawings Number of months amount Interest @8%
Jun 30 9 800 48
Sept 30 6 700 28
Dec 31 3 600 12
Total 88
New ratio
Partners old ratio Gain/(sacrifice) New ratio
A 5/8 5/8
B 3/8 (1/8) 3/8 – 1/8 = 2/8
C 1/8 1/8
So the new ratio between A:B:C will be 5:2:1.
the combined capital of A and B = 18,000 + 12,000 = Rs. 30,000
C brings Rs. 14,000 for 1/5th share.
This total capital should be 14,000 × 5 = 70,000
Existing capital = 14,000 + 30,000
Hidden G/W = 70,000 – 44,000 = 26,000
the firm. And this goodwill will be shared by the old partners in their profit sharing ratio.

ANSWERS
Sacrificing ratio = Old ratio –new ratio

New ratio
A 4/9 3/9 1/9
B 3/9 2/9 1/9
C 2/9 2/9 0
Since C is not sacrificing anything . Thus goodwill amount brought by D will be shared by A and B only
and equally.
55. The retiring partner is entitled to his share of goodwill at the time of retirement because the goodwill
earned by the firm is the result of the efforts of all the partners including the retiring partners. Since a part
of future profits will be accruing because of the present goodwill and the retiring partner will not share
the future profits, it will be fair to compensate the retiring partner for the same. At the time of retirement
of partner the goodwill is evaluated on the basis of agreement among the partners.
Goodwill can only be recorded in the books if some consideration in money or money’s worth is paid for
it. Hence goodwill account cannot be raised.
The adjustment for goodwill will be made through partner’s capital accounts. The following entry is
made:
Continuing partners capital account Dr. (in gaining ratio)
To retiring partners capital account (with his share of goodwill)
Gaining ratio
Y 3/10 ½ 3/10 – 1/2 = (2/10)
Z 2/10 ½ 2/10 – 1/2 = (3/10)
Thus their gaining ratio is 2:3 in which they will share X’s share.
56. Discount will be 60 paise (Rs. 10 × 0.06) per debenture.
57. Here A company makes an issue of 5000 equity shares of Rs. 100 each at par. The net amount is
On application and allotment 50
On first call 25
On final call 25
But A shareholder holding 100 shares did not pay final call money.
Thus share capital account will be debited by total called up value of the shares but discount account has
to be credited.

Here total called up value of the shares is 100 × (50 + 25 + 25) = Rs. 10,000. But discount account will
be credited by Rs. 1,000 (100 × 10)
58. A company may issue shares without cash to the promoters of the company for the services rendered by
them by debiting goodwill account. Here 1,000 shares of Rs. 100 each were issued to a promoter of the
company for their legal services, rendered in the formation of the company. For this, company credited
Share Capital Account and debited Goodwill account by Rs. 1,00,000.
1. All debentures are to be redeemed after a fixed period. When the debentures are to be redeemed
after a fixed period, the amount of discount will be distributed equally within the number of years
spreaded between the issue of debentures and their redemption. The amount of discount on issue of
debentures to be written off each year is calculated as
2. Debentures are redeemed in instalments
Debentures may also be redeemed in instalments but over a fixed period. In that case the amount of
debenture discount will be written off each year in proportion to the amount of debentures redeemed.
Here 10% Mortgage Debentures are rs. 1,00,000 (Payable after five years) and Discount allowed
on issue of debentures Rs. 2,000.
= Total amount of Discount/Number of years = 2,000/5 = Rs. 400
Here dividend payable will be 5% of (4,60,000 – 7,500) = Rs. 22,625

ANSWERS

1. Owner capital increase is done by crediting capital account.

2. Suppliers, creditors, lenders all are users of accounting information.
3. Accounting standards in India are issued by ICAI in India.
4. Cost of advertisement for the existing products is revenue in nature.
5. Personel accounts belong to persons, trade receivables or payables. Machninery, cash etc. are real
whereas expenses, losses, gains, revenue etc. are nominal.
6. Nominal account is governed by Debit all expenses, losses and credit all incomes, gains.
7. Adoption of same accounting policies over period of time is due to consistency.
8. Cash column in cash back always has debit balance. Bank column may have credit balance.
9. Depletion method of depreciation is used in natural resources (mines etc.).
10. Goods purchased from A wrongly passed through sales book. Rectification of this error will decrease
gross profit.
11. The drawings account is on debit side of trial balance.
12. Unpaid salary is a liability, can’t be recorded in purchases, purchases returns or bills receivable book. It
will be recorded in journal proper.
13. Capital expenditures are recorded in balance sheet. All revenue expenditures are reflected in P&L A/c
or Trading A/c.
14. ‘To Balance b/d’ are written on the debit side in case of Dr. balance.
15. Outstanding wages in trial balance is a liability, to be recorded in balance sheet. It should have been
adjusted (already) from wages.
16. Amount spent on replacement of a part of machine is revenue in nature.
17. Contingent liability is disclosed by way of footnote only, not added in total of balance sheet.
18. All the errors given in the question will not affect trial balance as same amount has been posted in both
accounts in the given entries.
19. Secret reserve is not shown in the balance sheet.
20. Capital expenditures provide benefit for a long period of time.
21. The statement sent by agent to consignee is called Account Sales.

22. the concept of conservatism was not followed in given case. As per conservatism, valuation should be
done at lower of cost or market value.
23. For bringing prepaid rent in the faks at the beginning of year, prepaid rent should be debited by corresponding
credit to Suspense A/c.
24. Credit sales = Rs. 1,30,000 + 5,000 – 10,000
= Rs. 1,25,000
Cash sales = Rs. 50,000
Total = Rs. 1,75,000
asset.
Where:
Depreciation/year = (25,000 – 5,000)/10 = Rs. 2000
Depreciation rate = (2,000/25,000) × 100 = 8%
Cost of goods sold = opening inventory + purchases less purchase return + direct expenses – closing
inventory = 5,570 + 13,816 – 390 + 1,650 – 8,880 = 11,766
And gross profit = sales less sales return – cost of goods sold = 15,248 – 524 – 11,766 = Rs. 2,958
27. Journal Entry for the given case should be to debit salary (expense) and to credit purchases (goods).

ANSWERS
Cost of goods sold = opening inventory + purchases – closing inventory
Thus purchases = cost of goods sold + closing inventory – opening inventory = 1,00,000 + 10,000 – 5,000
= Rs. 1,05,000
as Accrued expenses or outstanding expenses.
Here Rent has been paid for 11 months from April to February 2010 amounting Rs. 55,000.
So total rent for 11 months = 55,000
Thus total rent for 1 month = 55,000/11 = Rs. 5,000
And the outstanding rent for march 2010 will be Rs. 5,000
Closing capital =
Opening capital + profit + additional capital –drawings – interest on drawings
Where interest on drawings is charged it is usually calculated at fixed rate percent from the date of each
drawing to the date the accounts are closed. If the dates on which the amounts are drawn are not given,
interest is calculated on the whole amount on the assumption that the money was drawn evenly throughout
the year. The amount of interest is debited to partners drawings accounts and is credited to the interest
on drawings amount. At the close of the accounting period the interest on drawings accounts is closed by
transfer to the profit and loss account.
It may, however, be noted that if the withdrawals are of uniform amount and are made at regular
intervals, then interest on drawings can be calculated on the total of the amount drawn, for the average
of the periods applicable to first and last installment. Therefore, if drawings are made at the beginning of
each month, interest should be calculated on the whole amount for 6 and half months.
So interest on drawings will be = 5% of (2000 × 12) × 6.5/12 = Rs. 650
Closing capital = 3,00,000 + 20,000 + 50,000 – 24,000 – 650 = Rs. 3,45,350
31. For rectification we have to debit Ramesh (for making him debtor again) and to credit sales return as it
was wrongly debited.

Joint venture A/c
To A- purchases 42,500 By B-sale 50,000
To net profit transferred to-AB 11,500 By A-goods taken over 4,000
_______ _______
54,000
_______ 54,000
_______
Date Particulars Amount Amount
Cost of machinery 1,35,000
Less: Depreciation for 5 years on straight line basis
(1,35,000 – 5,000)/10 × 5 = 65,000
End of 5th year Wdv of the machinery 70,000
6th year depreciation (70,000 – 5,000)/8 8,125
Mohan ½ (1/4 × 1/2) = (1/8) ½ – 1/8 = 3/8
Krishna ½ (1/8) 3/8
Ram ¼ 2/8
So the sacrificing ratio between Mohan : Krishna : Ram will be 3 : 3 : 2.

ANSWERS
35. Value of inventory just before being unloaded at the consignees godown
The cost of the goods/inventory implies the value at which the goods are consigned by the consignor to
the consignee. Since the goods have reached the consignees godown, we can consider the consignor
expenses on the goods to have been incurred. Moreover any direct expenses incurred by the consignee
in relation to the transportation of the goods, octroi duties, insurance in transit etc., would also have to be
considered as having been incurred on the goods.
Here Expenses incurred by the consignor on sending goods to consignee are Rs. 1,000 for packing,
Rs. 1,500 on freight and Rs. 500 for insurance, while expenses incurred by the consignee on behalf of
consignment are Rs. 300 on Octroi, Rs. 800 Godown rent and Rs. 1,000 selling expenses.
So Expense amount to be excluded while calculating consignment inventory will be = godown rent +
selling expenses = 800 + 1,000 = Rs. 1,800
New ratio = Old ratio + Gaining ratio
A 4/9 5/8 5/8 – 4/9 = 13/72
B 3/9
C 2/9 3/8 3/8 – 2/9 = 11/72
Thus the gaining ratio between A and C is 13 : 11.
Reserve account.
share = 20 × 15 = Rs. 300
amount forfeited per share = 20 × (20) = Rs. 400

for a new product
price.
Here Consignee is entitled to get a commission of Rs. 25 per article sold plus one fourth of the amount by
which gross sale proceeds less his total commission thereon exceeded a sum at the rate of Rs. 125 per
articles sold.
Articles sold = 450
So basic commission = 450 × 25 = Rs. 11,250
Let the total commission be x (say)
Extra commission = 1/4(sales proceeds – x – 125 × articles sold) = 1/4 of (73,800 – x – 125 × 450)
Or x – 11,250 = 1/4 (17,550 – x)
Or 4 (x – 11,250) = 17,550 – x
Or 4x – 45,000 = 17,550 – x
Or 5x = 62,550
Or x = Rs. 12,510 = total commission.
39. Goods distributed for charity should be credited to purchases.
Here A company issued Rs. 1,00,000 15% Debentures at a discount of 5% redeemable after 10 years
at a premium of 10%.

ANSWERS
41. Amount spent for reduction in working expenses will give benefit for more than one accounting period,
thus it is capital in nature.
Reserve account.
share = 2,500 – 2,000 = Rs. 500
amount forfeited per share = 250 × (10 – 3-4) = Rs. 750
1. All debentures are to be redeemed after a fixed period. When the debentures are to be redeemed after
a fixed period, the amount of discount will be distributed equally within the number of years spreaded
between the issue of debentures and their redemption. The amount of discount on issue of debentures to
be written off each year is calculated as
2. Debentures are redeemed in instalments. Debentures may also be redeemed in instalments but
over a fixed period. In that case the amount of debenture discount will be written off each year in
proportion to the amount of debentures redeemed.
Here company issued debentures of the face value of Rs. 1,00,000 at a discount of 6% on Jan. 1, 2009.
These debentures are redeemable by annual drawings of Rs. 20,000 made on 31st Dec. each year. The
directors decided to write off discount based on the debentures outstanding each year.
Total discount = 6% of 1,00,000 = Rs. 6,000
31.12.2009 1,00,000 6,000 × 5/15 = 2,000
31.12.2010 80,000 6,000 × 4/15 = 1,600
31.12.2011 60,000 6,000 × 3/15 = 1,200

31.12.2012 40,000 6,000 × 2/15 = 800
31.12.2013 20,000 6,000 × 1/15 = 400
A 4/9 of 2/3 = 8/27 4/9 8/27 – 4/9 = – 4/27
B 3/9 of 2/3 = 6/27 3/9 6/27 – 3/9 = – 3/27
C 2/9 of 2/3 = 4/27 2/9 4/27 – 2/9 = – 2/27
D 1/3
So the sacrificing ratio between A B and C is 4 : 3 : 2
45. The maximum amount of discount allowed at the time of reissue implies the maximum amount of discount
that a company can allow at the time of reissue of the forfeited shares. The maximum discount on the
reissue of shares depends upon the following two circumstances.
Whether the forfeited shares were originally issued at par or at premium .
Whether the forfeited shares were originally issued at discount .
If the forfeited shares were originally issued at par or at premium , then these forfeited shares can be
reissued with the maximum discount equal to the amount received (or paid by) the original shareholder. On
the other hand, if the forfeited shares were originally issued at discount, then these forfeited shares can
be reissued with the maximum discount equal to the amount received (or paid by) the original shareholder
plus discount allowed at the time of original issue. Thus option (d) is the correct option.
account.

ANSWERS

To B’s capital a/c-Salaries of By Profit and Loss account
Partner 3,600 (Profit transferred from P & L account) 8,000
To Interest on Partners’ Capitals
(6% of 16000) 960
To Profit transferred to partners
A : 1/2 of 3,440 = 1,720
B : 1/2 of 3,440 = 1,720
______ ______
8000 8000
______ ______
47. Profit and Loss Appropriation Account
(for the year ending on 31st March 2008)
Particulars Particulars
To Interest on Capital: By Profit before adjustments 1,60,000
A 15,000
B 10,000
C 07,500 32,500
To net Profit transferred
A. (51,000 – 1,750) = 49,250
B. (1,27,500 × 3/10) = 38,250
C. (38,250 + 1,750) = 40,000 1, 27,500
________ ________
1,60,000
________ 1,60,000
________
C’s share in the profit before adjustment comes to 38,250.
So the amount to be sacrificed by A to make C’s profit as Rs. 40,000 will be = 40,000 – 38,250 =
Rs. 1,750

Oartners New ratio Old ratio Gain/(sacrifice)
A 5/10 6/10 5/10 – 6/10 = (1/10)
B 3/10 4/10 3/10 – 4/10 = (1/10)
C 2/10
So the sacrificing ratio between A and B is 1:1.
time of forfeiture.
Here Shveta holding 100 shares did not pay final call money.
Thus amount received in respect of the shares forfeited will be = 100 × (20 + 20 + 25) = Rs. 6,500
50. In case of retirement and death, goodwill is adjusted through the partners’ account in Gaining Ratio.
New ratio = old ratio + gaining ratio
A ½ 6/10 of ½ = 3/10
B ½ 4/10 of ½ = 2/10
C ½
Thus the gaining ratio between A and B will be 3:2.
51. On admission of a partner, unrecorded investments worth Rs. 5,000 and unrecorded liability towards
suppliers for Rs. 1,500 will be recorded in Revaluation A/c because old partner will only get profit or loss
through all business activities were done before coming of new partner. If there is any increase or
decrease in these unrecorded assets and liabilities through revaluation account, it will be distributed
between old partners.

ANSWERS

Add:
Cheques issued but not presented for payment 500
Interest collected by bank 400
Cheque deposited by customer direct into the bank 250 1,150
_______
_______
53. Average Profits Method: Under this method goodwill is calculated on the basis of the average of
some agreed number of past years. The average is then multiplied by the agreed number of years. This
is the simplest and the most commonly used method of the valuation of goodwill.
of that year.
Profit for the year 2 : 18,000
Profit for year 3 : 9,000
Loss for the year 4 : 2,000
Loss for the year 5 : 5,000
Average profit of last 5 years = (20,000 + 18,000 + 9,000 – 2,000 – 5,000)/5 = Rs. 8,000
Goodwill = 8,000 × 1.5 = Rs. 12,000.
54. Calculation of cash balance at the end:
Opening balance 10000
Add:
Cash sales 5,000
Collection from receivables (50,000 – 5,000 – 10,000) 35,000 40,000
_______
Cash balance at the end 50,000
_______

decrease is measured as depreciation.
Calculation of depreciation
Assets Value Depreciation rate Depreciation
Office furniture 8,000 5% 400
Plant and machinery 80,000 10% 8,000
Factory building 2,00,000 5% 10,000
Total 18,400
56. Assets such as automobiles, computer equipments, and office furniture, are customarily traded in for
new assets of the same kind. The trade-in-allowance (commonly known as exchange value) granted by
the dealer or manufacturer differs from the book value of the old asset. If the dealer grants an exchange
value greater than the book value, then a gain is realized on exchange of the asset. If the dealer grants an
exchange value lesser than the book value, then a loss is realized on exchange of the asset. As per
prudent and accepted accounting practices, the loss will be taken to the profit and loss account of the
year concerned, and profit on exchange will be deducted from the value of the new asset.
Here The old machinery has been valued at Rs. 800 for exchange purpose.
Thus loss on exchange will be book value of asset less exchange value = 5,000 – 800 = Rs. 4,200
the unsold goods must be included in the inventory at cost.
The sale price of the goods sent = Rs. 600
Let the cost price be x
So sales price = 600 = x + 20% of x = 1.2x
Or x = Rs. 500
58. Errors of principle, omission and commission all types may occur at time of recording transactions in
journal.
59. Entry for dishonour should be to reduce the bank balance and to make reversal of discount allowed.
further we have to make Hari Ram debit again for Rs. 720.

ANSWERS
Here paid rent to landlord Rs. 2,400, debited to Land Lord’s A/c by Rs. 2,004. Thus the land lords
account is undercasted by 2,400 – 2,004 = Rs. 396
So the rectifying entry will be
Rent A/c Dr. 2,400
To Landlord 2,004
To Suspense 396

1. Ledger posting is function of book-keeping not accounting.

2. If revenue earning capacity is increased, it will be treated as capital.
3. Recovered bad debts will be credited to bad debts recovered A/c not P&L A/c or Trade Receivables.
4. Total of sales return book is posted to debit of Sales Return A/c.
5. Bill payable is in name of some individual, thus personal.
6. Due to Money measurement concept, all assets which can be measured in money terms, are recorded.
Human asset can’t be measured in monetary terms.
7. Sales Returns book records returns of credit sales only not cash sales.
8. Average profit (simple or weighted) is multiplied with no. of years under Average profit method for
calculation of goodwill.
9. Rent is an expense or if received (income). It is a nominal account.
10. Parties to bill of exchange are Drawer (who draws), drawee (on whom bill is drawn) and payee (to
whom payment is to be made). Thus all are parties.
11. Financial transaction involves transfer of money or money’s worth.
12. Income is reflected in form of inflow of assets or decrease of liabilities.
13. Location of business, nature of business, technical know-how all affect goodwill except management
efficiency.
14. Profit/loss on revaluation is shared among partners in old profit sharing ratio.
15. ‘Closing inventory’ means goods lying unsold at the end of previous accounting period or at beginning of
current accounting period.
16. General reserve will be transferred to old partners in the old profit sharing ratio.
17. Depreciation on machinery is recorded in P&L A/c as it is an expense.
18. For rectification, we need to credit Insurance company (receipt of claim) and debit drawings a/c as
proprietor has deposited this cheque in his personal account.
19. Fixed capital account is not credited with interest, profit or salary of partner. Fluctuating capital account
is credited with all these items.
20. Interest on capital is an expense but interest on drawings is an income/gain for the firm.
21. Old bill should be considred as cancelled in the given case.

ANSWERS
22. Auditor objected as consistency in method of depreciation should be observed and change should be
done only if required by statute or change would result in appropriate presentation of financial statement.
asset.
Where:
Depreciation/year = (5,000 – 500)/10 = Rs. 450
Depreciation rate = (450/5,000) × 100 = 9%
24. Net profit is calculated by subtracting a company’s total expenses from total revenue, thus showing what
the company has earned (or lost) in a given period of time (usually one year). also called net income or net
earnings.
Here net profit = gross profit – Carriage Outwards – Rent paid – Bad Debts + Apprentice premium –
Printing & Stationery = 51,000 – 5,800 – 6,400 – 2,600 + 1,500 – 1,000 = Rs. 36,700.
Opening balance 10,000
Add:
Cash sales 5,000
Collection from receivables(50000 – 5000 – 10000) 35,000 40,000
_______
Less:
Cash purchases 10,000
Payment to suppliers 15,000
Expenses paid 19,300
_______ (44,300)
_______
_______

26. Where interest on drawings is charged it is usually calculated at fixed rate percent from the date of each
the year. The amount of interest is debited to proprietor’s drawings accounts and is credited to the
interest on drawings amount. At the close of the accounting period the interest on drawings accounts is
closed by transfer to the profit and loss account.
It may, however, be noted that if the withdrawals are of uniform amount and are made at regular
intervals, then interest on drawings can be calculated on the total of the amount drawn, for the average
of the periods applicable to first and last installment. Therefore, if drawings are made at the beginning of
each month, interest should be calculated on the whole amount for 6 and half months.
Here Ram Gopal withdrew Rs. 2,000 on the first day of each month interest on drawings is provided @
10%.
So interest on drawings will be = 10% of (2000 × 12) × 6.5/12 = Rs. 1,300
of error in the books of accounts. These errors in accounting require rectification.
Here bills receivable passed through bills payable thus bills payable account is overcasted and bills
receivable is undercasted.
So the rectifying entry will be
B/P A/c Dr. 500
B/R A/c Dr. 500
To A 1,000
28. Cost Price: The price, at which an article is purchased, is called its cost price, abbreviated as C.P.
Selling Price: The price, at which an article is sold, is called its selling prices, abbreviated as S.P.
Profit or Gain: If S.P. is greater than C.P., the seller is said to have a profit or gain.
Here Goods costing Rs. 7,500 were sold at 25% profit on selling price.
Let the sales = x (say)
Sales = cost + profit
Or x = 7,500 + .25x
Or 0.75x = 7,500
Or x = Rs. 10,000.

ANSWERS
inventory = 80,000 + 3,00,000 – 6,000 + 12,000 + 4,000 + 8,000 – 60,000 = 3,38,000
And gross profit = sales less sales return – cost of goods sold = 4,10,000 – 10,000 – 3,38,000 = Rs. 62,000
Dr. (Rs.) Cr. (Rs.)
Purchases 60,000
Reserve Fund 20,000
Sales 1,00,000
Purchase return 1,000
Sales Return 2,000
Opening Inventory 30,000
Closing Inventory
Sundry Expenses 20,000
Outstanding Expenses 2,000
Cash at Bank 5,000
Fixed Assets 50,000
Trade payables 30,000
Capital 94,000
________ ________
2,47,000 2,47,000
________ ________
Balance as per cash book(cr) 2,500
Add:
Cheques deposited in the Bank but not cleared 1,000 1,000

Less:
Cheques drawn but not presented for payment 1,400 (1,400)
________
Balance as per pass book(dr) 2,100
________
32. Consistency has been violated in the given case.
33. Balance Sheet
Capital 70,000 Inventory 40,000
Profit 18,000 Debtors 40,000
________
88,000 Bill receivables 5,000
(–) Drawings 12,000 76,000 Cash at bank and hand 11,000
________
Machinery 20,000
Bill payables 3,000
Creditors 30,000
Liability for expenses 3,000
Dep. provision 4,000
________ ________
1,16,000 1,16,000
________ ________
Consignment account
To goods sent on consignment By Ram Ji Lal-sales
A/c(100 × 150) 15,000 (90 × 180) 16,200
To bank- packing and dispatch 500 By closing inventory 1,620
To Ram Ji Lal-freight 500
To Ram Ji Lal-carriage and octroi 200
To Ram Ji Lal-godown rent 100
To Ram Ji Lal-insurance 150
To Ram Ji Lal-commission 1,215
To profit on consignment 155
________ ________
17,820 17,820
________ ________

ANSWERS

Cost of goods consigned = 15,000
Add: packing and dispatch = 500
Add:freight = 500
Add: Carriage = 200
Total cost = 16,200
normal loss.
No separate entry is made in the books of consignor in case of normal. such loss is considered while
calculating the cost of inventory left unsold with the consignee. The value of unsold stock on consignment
is increased because the value of stock is the proportion of the cost of the goods consigned and direct
expenses that the quantity of inventory bears to the total quantity of goods consigned as diminished by the
normal loss of goods.
Here Bharti consigned to Bhawna 1,500 Kg of flour costing Rs. 4,500. She spent Rs. 307 as forwarding
charges. 5% of the consignment was lost in weighing and handling. Bhawna sold 1,350 Kg of flour at Rs.
4 per kg.
Units lost = 5 % of 1,500 = 75 kgs
Closing inventory = 95% of 1,500 – 1,350 = 75 kgs
Cost of goods consigned = 4,500 + 307 = Rs. 4,807
Value of closing inventory = units of unsold inventory × (original cost of goods consigned + direct expenses)/
(total units-units lost)
= 75 × 4,807/(1,500 – 75) = Rs. 253.
36. Furniture and fittings is a fixed asset not current.

Reserve account.
share = 30 × 15 = Rs. 450.
Here dividend payable will be 5% of (Equity share capital called up - Calls in arrear ) = 5% of (10,00,000
– 40,000) = Rs. 48,000.
39. Plant and machinery is fixed asset. all others are current.
40. Loss on reissue will be Re. 1 per share. The total amount of Rs. 200 will be loss.
decrease is measured as depreciation. The depreciation method selected should be applied consistently
from period to period. A change from one method of providing depreciation to another should be made
only if the adoption of the new method is required by statute or for compliance with an accounting
standard or if it is considered that the change would result in a more appropriate preparation or presentation
of the financial statements of the enterprise. When a change in the method of depreciation is made,
depreciation should be recalculated in accordance with the new method from the date of the asset
coming into use. The deficiency or surplus arising from the retrospective recomputation of depreciation
in accordance with the new method would be adjusted in the accounts in the year in which the method
of depreciation is changed. In case the change in the method results in deficiency in depreciation in
respect of past years, the deficiency should be charged to the profit and loss account. In case the change
in the method results in surplus, it is recommended that the surplus be initially transferred to the
‘Appropriations’ part of the profit and loss account and thence to General Reserve through the same part
of the profit and loss account.

ANSWERS
Computation of depreciation by both methods

Year WDV Depreciation by Depreciation by
diminishing balance fixed installment
method method
1.12006 20,000
31.12.2006 17,000 3,000 3,000
31.12.2007 14,450 2,550 3,000
31.12.2008 12,282 2,168 3,000
Total depreciation 7,718 9,000 Deficiency = 1,282
Thus Adjusted amount will be: Rs. 1,282
probable bad debts
An increase in provision for bad debts is recorded as follows
DEBIT the difference (new provision minus old one) to Income Statement*
*Note : In the Income Statement this is recorded as an increase in provision for bad debts and listed in expenses
Closing Provision for Bad Debts = 5% on (trade receivables – bad debts) = 4% on (1,95,000 – 4,200) =
7632
Opening provision less bad debts = 6,500 – 4,200 = 2,300
Increase in provision for bad debts = – 7,632 – 2,300 = 5,332
Provision for bad debts debited to Profit and Loss A/c will be Rs. 5,332.
Cost of goods sold in the above case = purchases less returns = 60,000 – 10,000 = 50,000
Profit = sales less return – cost of goods sold = 80,000 – 10,000 – 50,000 = Rs. 20000
44. Under average profit method goodwill is calculated on the basis of the average of some agreed number

of that year.
Profit of the year 1 : 40000
Profit for the year 2 : 50000
Profit for year 3 : 60000
Profit for year 4 : 50000
Average profit of last 4 years = (40,000 + 50,000 + 60,000 + 50,000)/4 = Rs. 50,000
Goodwill = 50,000 × 3 = Rs. 1,50,000
45. The adjustment of insurance claim will be reflected in all three-trading A/c, P&L and balance sheet.
46. Loan amount = 10,000
Interest payable = 6% of 10,000 = Rs. 600
Interest on loan paid = 300
Thus interest outstanding = 600 – 300 = Rs. 300
asset.
1-7-2006 Cost of machinery 20,000
31-12-2006 Depreciation (10% of 20000) for 6 months 1,000
1-1-2007 wdv 19,000
31-12-2007 depreciation 2,000
1-1-2008 wdv 17,000
31-12-2008 depreciation 2,000
1-1-2009 wdv 15,000
31.12.2009 depreciation 2,000
31.12.2009 wdv 13,000
At the end of the year 2009 it was sold for Rs. 15,000.
Profit on sale will be sale proceeds – WDV = 15,000 – 13,000 = Rs. 2,000

ANSWERS
Here A boiler was purchased from abroad for Rs. 10,000, shipping and forwarding charges amounted to
Rs. 2,000, Import duty Rs. 7,000 and expenses of installation amounted to Rs. 1,000.
Thus cost of asset = 10,000 + 2,000 + 7,000 + 1,000 = Rs. 20,000
Cost of machinery 20,000
1st year depreciation 2,000
1st year wdv 18,000
2nd year depreciation 1,800
2nd year wdv 16,200
3rd year depreciation 1,620
3rd year wdv 14,580
Here Syam prepared a trial balance for his factory on 31st March, 2010. The debit total of trial balance
was short by Rs. 500. He transferred the deficiency to suspense A/c. After a close examination he found
that the purchase day book for Sept. 2009 was undercast by Rs. 500.
Since purchases has debit balance Necessary Journal entry to rectify the error will be:
Purchases A/c Dr. 500
To Suspense 500
50. If purchases journal is short by Rs. 1,000, it will affect trial balance.

Here Total amount of the A’s acceptance = 8,000
Amount paid = 4,000
52. Total value of machine purchased = Rs. 1,15,000
Payment made by cheque = 10,000
Remaining amount to be paid by issue of shares = 1,05,000
Value per share including premium = Rs. 10.5
Thus number of shares to be issued = 1,05,000/10.5 = 10,000 shares
Face Value of shares issued = 10,000 × 10 = Rs. 1,00,000
Thus securities premium = 1,05,000 – 1,00,000 = Rs. 5,000
price.
Here B sold 50 televisions at Rs. 15,000 per television. He was entitled to commission of Rs. 500 per
television sold plus one fourth of the amount by which the gross sale proceeds less total commission there
on exceeded a sum calculated at the rate of Rs. 12,500 per television sold.
Articles sold = 50
So basic commission = 500 × 50 = 25000Rs.
Let the total commission be x(say)
Extra commission = 1/4 (sales proceeds – x – 12,500 × articles sold) = 1/4 of (7,50,000 – x – 12,500 × 50)
Or x – 25,000 = 1/4 (1,25,000 – x)

ANSWERS
Or 4 (x – 25,000) = 1,25,000 – x
Or 4x – 1,00,000 = 1,25,000 – x
Or 5x = 2,25,000
Or x = Rs. 45,000 = total commission.
54. In case when a bill of exchange matures on a public holiday then the due date will be the preceding
business day.
In this question A bill of exchange matures on 19th July. It is a public holiday. Bill will mature on the
preceding day i.e.18 th july.
55. Rs. 36,400 = (1,12,000 + 6,200) less (65,000 + 6,000 + 3,000 + 6,170 + 1,630)
56. The expired portion of capital expenditure is expense, unexpired is asset.
Closing capital =
Here opening capital = 15,200
Further introduction of capital = 2,000
Drawings in cash = 4,800
Closing capital = 16,900
Closing capital = opening capital + profits – drawings
Profit = closing capital – opening capital – capital introduced during the year + drawings = 16,900 –
15,200 – 2,000 + 4,800 = Rs. 4,500 (profit)

Here interest collected by bank Rs. 500 and direct deposit by a customer into his bank Rs. 2,500 will be
added to the balance as per cash book.
59. Recovery of bad debts is a revenue receipt.
domestic trade transactions, confirmed in particular with an invoice – with right of recourse to you – and
Thus amount received from bank on discounting = Rs. 48,000
The charges of the bank is borne by A and B equally and on maturity A will send Rs. 25,000 to B.

ANSWERS

1. Capital reduces due to loss.

2. Balance sheet inform the picture of assets and liabilities i.e. financial position.
3. Determination of expenses for accounting period is based on matching concept.
4. Rent payable (liability) will be credited to outstanding rent a/c.
5. Entry for bad debts is passed in Journal not in sales or cash book.
6. Goods sold on credit basis will be recorded in sales book.
7. Compensation paid to retrenched employee is revenue in nature.
8. Petty cash book is meant for petty expenses paid in cash.
9. Maturity date is three days after 2 months i.e. June 4.
10. Furniture and fittings is fixed asset not current.
11. Maintenance of capital asset is revenue expense.
12. Creation of provision for discount is based on conservatism.
13. Interest on capital will be paid to partners only from current profits.
14. Policy amount is received from insurance company against JLP taken jointly for all partners at time of
death of a partner.
15. Revaluation A/c is opened at admission and retirement of a partner.
16. Interest debited in pass book will be added in cash book.
17. Inventory is a current asset (realizable in cash in short period of time).
18. The rate is 6% p.a. as per Partnership Act.
19. Fluctuating capital account is credited with interest on capital, profit of year and remuneration to partners.
20. Additional amount is called premium for goodwill.
21. Conservatism has been followed in the given case.
22. Conservatism will be violated if we count the way given in the question.

Balance of plant and machinery as on 1-1-2010 = 145800
Let Original cost of plant and machinery purchased on 1-1-2006 = x (say)
31-12-2007 depreciation 10% of x = 0.10x
1-1-2008 wdv x – 0.10x = 0.9x
1-1-2009 wdv 0.9x – 0.09x = 0.81x
1-1-2010 wdv 0.81x – 0.081x = 0.729x = 1,45,800
We got 0.729x = 1,45,800
So x = Rs. 2,00,000
Thus Cost of machinery on 1.1.2007 will be Rs. 2,00,000.
company. It excludes indirect expenses such as distribution costs and sales force cost. In the above case
lets find out gross profit with the help of trading account.
Trading account as on…
To Opening inventory 80,000 By Sales (1,60,000 + 2,50,000)
To Purchases Less return (10,000) 4,00,000
(1,00,000 + 2,00,000)
Less returns (6,000) 2,94,000 By Closing inventory 60,000
To Carriage inward 12,000
To wages 12,000
_______ _______
Total 4,60,000 Total 4,60,000
_______ _______
25. A trial balance is a list of all the General ledger accounts (both revenue and capital) contained in the
ledger of a business. This list will contain the name of the nominal ledger account and the value of that
nominal ledger account. The value of the nominal ledger will hold either a debit balance value or a credit
balance value. The debit balance values will be listed in the debit column of the trial balance and

ANSWERS
the credit value balance will be listed in the credit column. The purpose of a trial balance is to prove that
the value of all the debit value balances is equal the total of all the credit value balances.
Dr. Balance (Rs.) Cr Balance (Rs.)
Capital 12,000
Sales 50,000
Purchases 30,000
Cash 5,700
Trade receivable 10,000
Trade payables(30000 – 10000 – 15000) 5,000
Expenses 19,300
Furniture 2,000
_______ _______
Total 67,000 67,000
_______ _______
Calculation of cash balance at the end:
Add:
Cash sales 5,000
Collection from receivables (50000 – 5000 – 10000) 35,000 40,000
Less:
Expenses paid 19,300 (44,300)
_______ _______
_______
Here new machine was purchased for Rs. 1,00,000 but the amount was wrongly posted to furniture
account as Rs. 10,000 and cash received from customers Rs. 11,200 was omitted to be posted in the
ledger. The fixed asset account is undercasted by 1,00,000 – 10,000 = Rs. 90,000. And since cash
received from customers 11200 was omitted to be posted so the asset side is undercasted by Rs.11200.
Thus the difference in trial balance due to such errors will be 90,000 – 11,200 = Rs. 78,800.

27. Purchase cost = 10,000
Add: repairing expenses = 1,000
Add: miscellaneous expenses = 500
Total cost = 11,500
Selling price = x (say)
Margin = 20% of x = 0.2x
Cost = x – 0.2x = 0.8x = 11,500
or x = Rs. 14,375.
28. Interest on calls in arrear is charged at 10% as per Table F under Companies Act, 2013.
29. A company cannot issue irredeemable preference shares.
30. The cost of a fixed asset includes all amounts incurred to acquire the asset and any amounts that can be
directly attributable to bringing the asset into working condition.
Directly attributable costs may include:
– Delivery costs
– Costs associated with acquiring the asset such as stamp duty and import duties
– Costs of preparing the site for installation of the asset
– Professional fees, such as legal fees and architects’ fees
Here A second hand car is purchased for Rs. 10,000.00 the amount of Rs. 1,000.00 is spent on its
repairs, Rs. 500.00 is incurred to get the car registered in owner’s name and Rs. 1,200.00 is paid as
dealer’s commission.
The amount debited to the car account = purchase price + repair + registration charges + dealers
commission = 10,000 + 1,000 + 500 + 1,200 = Rs. 12,700.
31. Where interest on drawings is charged it is usually calculated at fixed rate percent from the date of each
the year. The amount of interest is debited to partners drawings accounts and is credited to the interest
on drawings amount. At the close of the accounting period the interest on drawings accounts is closed by
transfer to the profit and loss account.
Date of drawings Number of months Amount Interest @ 6%
Jul 1 9 200 9
Aug 1 8 200 8
Sept 1 7 300 10.5

ANSWERS
Nov 1 5 50 1.25
Feb 1 2 100 1
Total 29.75
Closing capital =
Here closing assets = Rs. 58,300
Closing liabilities = Rs. 4,700
So closing capital = Rs. 53,600
Profit = Rs. 53,600 – Rs. 38,600 = Rs. 15,000
Total expenses on joint venture:
Freight by A = 3,000
Add:selling expenses by B = 5,000
Add:interest on loan by A = 18% of 50,000 for 1 month = 750
Add:interest on loan by B = 18% of 1,50,000 for 2 months = 4,500
Total expenses on joint venture = Rs. 13,250
34. The cost of a fixed asset includes all amounts incurred to acquire the asset and any amounts that can be
directly attributable to bringing the asset into working condition.
Directly attributable costs may include:
– Delivery costs
– Costs associated with acquiring the asset such as stamp duty and import duties
– Costs of preparing the site for installation of the asset
– Professional fees, such as legal fees and architects’ fees

Here A boiler was purchased from abroad for Rs. 10,000, shipping and forwarding charges amounted to
Rs. 2,000, Import duty Rs. 7,000 and expenses of installation amounted to Rs. 1,000.
Thus cost of asset = 10,000 + 2,000 + 7,000 + 1,000 = Rs. 20,000
Value of inventory after being placed in the consignees godown
= Cost of Goods + Consignors Direct Expenses + Proportionate Consignee Direct Expense
consignee. Since the goods have reached the consignees godown and have been unloaded, we can
consider the consignor expenses on the goods to have been incurred. Moreover any direct expenses
incurred by the consignee in relation to the transportation of the goods, octroi duties, insurance in transit,
unloading charges etc., would also have to be considered as having been incurred on the goods.
of the consignee expenses which relate to the expenses incurred till they are unloaded.
Valuation of closing inventory:
Cost of 300 units consigned = 75,000
Add: insurance = 900
Add: freight = 1,500
Add: unloading charges by consignee = 400
Add: octroi = 600
Add: carriage = 800
Total cost of 300 units = 79,200
Units of closing inventory = 300 – 200 = 100units
Depreciation Cost of machinery WDV
1st year 80,000
1st year 8,000 72,000
2nd year 7,200 64,800

ANSWERS
3rd year 6,480 58,320

4th year 5,832 52,488
Balance of furniture account at the end of the fourth year will be: Rs. 52,488.
Consignment account
To goods sent on
consignment A/c(50 × 350) 17,500 By B-sales 28,000
To bank-freight and insurance 1,800
To B-selling expenses 900
To B-commission 1,000
Here when balance as per cash book is taken as the starting point then Bank charges debited by Bank
Rs. 10 will be reduced from the balance, cheques paid in but dishonoured Rs. 200 will also be subtracted
from the balance, cheques paid in but not credited by bank Rs. 950 will also be added.
39. Cost Price: The price, at which an article is purchased, is called its cost price, abbreviated as C.P.
Selling Price: The price, at which an article is sold, is called its selling prices, abbreviated as S.P.
Profit or Gain: If S.P. is greater than C.P., the seller is said to have a profit or gain.
Here Goods costing Rs. 7,500 were sold at 25% profit on selling price.
Let the sales = x(say)
Sales = cost + profit
Or x = 7500 + .25x
Or 0.75x = 7,500
Or x = Rs. 10,000

The date of accepting the bill is 2.04.10.
Add 1 month will give us 2.05.10
Add 3 days of grace gives us 5.05.10
Thus may 5th is the due date.
41. Interest on debentures is charge against profits not appropriation.
Sacrificing ratio = old ratio – new ratio
Calculation of sacrificing ratio
Partners Old ratio New ratio Sacrificing ratio
A 3/5 5/10 3/5 – 5/10 = 1/10
B 2/5 3/10 2/5 – 3/10 = 1/10
C 2/10
So the sacrificing ratio between A:Bwill be 1/10:1/10 = 1 : 1
To net Profit transferred 31,500 By Profit before adjustments
A. (31,500 × 4/7 – 3,000) = 15,000 A 15,000
B. (31,500 × 2/7) = 9,000 B 10,000
C. 7,500 C 7,500 31,500
C’s share in the profit before adjustment comes to 31500 × 1/7 = 4500.
So the amount to be sacrificed by A to make C’s profit as Rs. 7,500. Will be = 7,500 – 4,500 = Rs. 3,000

ANSWERS
the firm.
Here the share in profit is 1/5th
The total value of goodwill = 60,000
Thus C’s share of goodwill brought by him = 1/5 of 60,000 = Rs. 12,000
Here profit for the year = 20,000
Thus capitalized value of profit = 20,000 × 100/10 = 2,00,000
Thus Goodwill = 2,00,000 – 1,50,000 = 50,000.
46. Credit purchase of stationery worth Rs. 10,000 by a stationery dealer will be recorded in purchases book.
47. Debentures issued as colletual security will be added in total of liabilities as well as assets.
48. Premium on issue of debentures will be shown as Securities Premium under Reserve and Surplus.

Here these are repayable out of profits by equal annual drawings over 5 years. So the amount of
Date Debentures to be redeemed Proportion of Discount written off
31.12.2009 1,00,000 10/30
31.12.2010 80,000 8/30
31.12.2011 60,000 6/30
31.12.2012 40,000 4/30
31.12.2013 20,000 2/30
Thus the proportion will be 5 : 4 : 3 : 2 : 1.
50. Returns of cash sales will be recorded in cash book.
51. Securities premium is recorded in balance sheet under heading ‘reserves and Surplus’.
Reserve account.
share = 15 × 15 = Rs. 225
53. Total value of plant and machine purchased = Rs. 2,00,000
Payment made in cash = 65,000
Remaining amount to be paid by issue of 6%debentures = 1,35,000
Value per debenture after discount = Rs. 900
Thus number of shares to be issued = 1,35,000/900 = 150 debentures
Face Value of debentures issued = 150 × 1000 = Rs. 1,50,000.
Thus Discount amount will be = 1,50,000 – 1,35,000 = Rs. 15,000.

ANSWERS

individuals/institutions who lend it money (invest in their debentures). For an investor investing in a
debenture is just like investing in a fixed deposit with the difference that while he can withdraw the
amount invested in a fixed deposit any time he/she likes with a loss of interest.. He cannot do so with a
debenture. The amount invested on a debenture will be repaid only on the expiry of the period for which
the debenture has been issued. if the debentures were originally issued at a discount and redeemed at
premium then the case of loss on issue of debentures arise.
Here A Co. issued Rs. 1,00,000 15% Debentures at 5% discount, redeemable at 10% premium after 10
years.
Thus total loss on issue of debentures = 5,000 + 10,000 = Rs. 15,000.
55. We know that Credit sales = closing receivables + cash received from receivables + bad debts + return
inwards – opening receivables
Thus closing receivables = credit sales – cash received from receivables – bills received from customers
– bad debts – return inwards + opening receivables
Credit sales = total sales – cash sales = 90,000 – 20,000 = 70,000
Thus closing receivables = 70,000 – 20,000 – 10,000 – 3,000 – 1,000 + 20,000 = Rs. 56,000
Here the goods are sent to the consignee at cost + 25%
Cost of goods sent = Rs. 10,00,000
Let Invoice value of the goods sent = 10,00,000 + 25% of 10,00,000 = 12,50,000
57. A company may issue shares without cash to the promoters of the company for the services rendered by
them by debiting goodwill account. Here 2,000 shares of Rs. 100 each were issued to a promoter of the
company for their legal services, rendered in the formation of the company. For this, company credited
Share Capital Account and debited Goodwill account by Rs. 2,00,000.
58. Salaries for the year ending 31st Dec 2009 = 10 × 1,000 = Rs. 10,000
Raise in salary = 20%
So salaries for the year ending 31st Dec 2010 = 10,000 + 20% of 10,000 = Rs. 12,000.
asset.

Where:
Here Cost of the machinery = Rs. 10,00,000
Add: Installation charges = 1,00,000
Total cost of the machine = 11,00,000
Depreciation/year = 11,00,000 × 20% = Rs. 2,20,000
60. Sum of the years’ digits depreciation method, like reducing balance method, is a type of accelerated
depreciation technique that allocates higher depreciation expense in the earlier years of an asset’s useful
life.
Calculation of depreciation under this method can be summarized in the following 4 steps:
Step 1: Calculate the sum of the years’ digits in an asset’s useful life
Here the asset is having a useful life of 6 years, the sum of the years’ digits will be calculated as follows:
Sum of years’ digits = 6 + 5 + 4 + 3 + 2 + 1 = 21
Step 2: Calculate the depreciable amount
Depreciable amount, as with all depreciation methods, is equal to:
Asset’s cost of acquisition or construction including any subsequent capital expenditure
Less: Estimated residual value or scrap value at the end of the asset’s useful life
Here depreciable amount = 1,26,000
Step 3: Calculate the un-depreciated useful life
Un-depreciated useful life is equal to the number of years in the asset’s useful life that have not yet been
subjected to depreciation.
Hence, for an asset that has a useful life of 6 years, the un-depreciated useful life to be used in calculating
depreciation shall be 6 years in the first year of depreciation, 5 years in the second year and so on.
Step 4: Calculate depreciation using the sum of years’ digits & un-depreciated useful life
Depreciation using the sum of the years’ digits method can be calculated using the following formula:
Depreciation expense = (un-depreciated useful life/ sum of the years’ digits) × depreciable amount
Thus Depreciation for the fourth year under sum of digits method will be = 3/21 × 1,26,000 = Rs. 18,000.

ANSWERS

1. The amount spent on second hand car purchased recently is capital expenditure.
2. Commission received in advance (belonging to some person) is a personal account.
3. 6% debentures is a liability and has credit balance. All others have debit balances.
4. Cash and bank transactions are recorded in double column cash book.
5. Maturity date will be 3 months and 3 days after August 10, 2009 i.e. November 13, 2009.
6. Salaries and wages is debited to P&L A/c. Wages and salaries is debited to Trading A/c.
7. Income tax of proprietor is recorded as his personal expense i.e. drawings.
8. Purchase of an asset on credit basis is recorded in Journal Proper. Credit purchases are recorded in
purchases book.
9. Bill will mature on the next working day if maturity date is unforesean holiday.
10. Abnormal loss is valued at cost price in case of consignments.
11. Capital expenditures are recorded in the balance sheet as assets.
12. Account payable is a liability and has credit balance.
13. Trial balance shows debit or credit balances of all accounts.
14. Prepaid salary (belonging to some person) is a personal account.
15. The Bank debits the account of customer when he/she withdraws money.
16. Abnormal loss on consignment will be credited to consignment A/c.
17. Land and building is fixed asset not current.
18. Average profit = Rs. 84,000 + 78,000 + 90,000 divided by 3 = Rs. 84,000.
19. Closing inventory (if given in trial balance) will be recorded in balance sheet only.
20. 5/6 will be divided between A and B in ratio 3 : 2.
A’s share = 3/6
B’s share = 2/6
New ratio will be 3/6 : 2/6 : 1/6
3 : 2 : 1.

21. If depreciation is recorded by charging to asset, asset will appear at original cost less depreciation.
22. The emphasis of the auditor is due to historical cost concept.
Add:
Cash sales 5,000
Collection from receivables (50,000 – 5,000 – 10,000) 35,000 40,000
Less:
Salaries paid 3,000
Rent 2,400
Stationery 900
Miscellaneous expenses 1,000
Machine purchased 8,000
Drawings 4,000 44,300
_______
_______
Option (d) is correct.
Here gross profit = sales revenue – cost of goods sold = 5,00,000 – 3,10,000 = Rs. 1,90,000.
Here bills received was passed through bills payable so bills received account is undercasted and bills
payable account is overcasted and Arun A/c also needs rectification.

ANSWERS
So the rectification entry will be

B/R A/c Dr. 5,000
B/P A/c Dr. 5,000
To Arun 10,000
26. At the time of sale of the machinery the depreciation provision of the machinery is to be deducted from
the original value of machine and all the expenses associated to promote the sale of machine is deducted
from the sale proceeds.
Thus WDV of the machine = 4,000 – 500 = 3,500
Sale proceeds less expenses on sale = 5,200 – 420 – 150 = 4,630
Profit = 4630 – 3500 = Rs. 1,130.
27. Adjustment entry for interest earned but not received will be to debit Accured Interest (as asset) and to
credit interest income.
the unsold goods must be included in the inventory at cost. When the goods sent on sale or approval basis
are treated as sale, for the goods not yet approved, the sale entry is reversed at the year end.
Here the cost of inventory = x(say) = 600 – 20% of x
Or x + 0.2x = 600
Or 1.2x = 600
Or x = 600/1.2 = Rs. 500
Manager’s commission = Net Profits × (Percentage of commission / 100 + % of commission)
Here the managers commission is 5% of net profit after charging such commission
So the managers commission will be = (48,000 – 6,000) × (5/105) = Rs. 2,000

Here commission is 5% on net profit before charging such commission
So the commission of the manager will be = (48,000 – 6,000) × 5/100 = Rs. 2,100
31. Cost price is also known as cp. It is the original price of any item. The cost is the total outlay required to
produce a product or carry out a service.
Here x sells goods at cost plus 60%. Total sales were of Rs. 16,000.
Let cost price = x (say)
The selling price = cost price + 60% of cost price
Thus 16000 = x + 60% of x
Or 1.6x = 16,000
Or cost price = x = 16,000/1.6 = Rs. 10,000
32. Cost price is also known as cp. It is the original price of any item. The cost is the total outlay required to
produce a product or carry out a service. Cost price is used in establishing profitability in the following
way:
Profit /cost price when expressesd as a percentage produces rate of profit on cost.
Here trader sells goods at a profit of 25% on sale.
So let sale price = x (say)
Thus cost price = x – 25% of x
Or 34,200 = 0.75x
Or x = 34,200/0.75 = Rs. 45,600
And profit = 25% of 45,600 = Rs. 11,400
Thus Rate of profit on cost will be = 11,400/34,200 × 100 = 331/3%
33. Cost price of goods = 40,000
Let sale price = x(say)
Thus sale price – profit = x – 20% of x = 40,000
Or 0.8x = 40,000
X = 40,000/0.8 = Rs. 50,000.
Commission = 5% of 50,000 = Rs. 2500.

ANSWERS
inventory = 16,500 + 46,850 – 110 + 2,500 + 850 – 18,210 = 48,380
And gross profit = sales less sales return – cost of goods sold = 63,500 – 450 – 48,380 = 14,670.
Net profit is calculated by subtracting a company’s total expenses from total revenue, thus showing
what the company has earned (or lost) in a given period of time (usually one year). also called net
income or net earnings.
Here net profit = gross profit – General expenses – Discount allowed – Rent paid – Electric charges –
Salaries = 14,670 – 800 – 200 – 3,710 – 190 – 1,110 = Rs. 8,660
Formulas of Closing Capital
Closing capital =
Thus profit/(loss) = closing capital – opening capital – additional capital + drawings
Or profit/(loss) = 12,750 – 20,000 – 2,000 + 250 × 12 = (6,250).
Add:

Less:
Balance as per pass book (dr) 475
probable bad debts. Trade receivables will appear in balance sheet at Rs. 22,500 (25,000 × .9).
Trial balance of….as on ……
Dr. Cr.
Rs. Rs.
Provision for Doubtful Debts 200
Capital – 4591
Trade payables – 1637
Discount received 252
Discount allowed 733
Drawings 1,200
Office furniture 2,155
General expenses 829
Purchases 10,923
Return inward 330
Rent and Rates 314
Salaries 2,520
Sales – 16,882
Inventory 2,418
Stationary 1,175
Provision for Depreciation on furniture 364
______ ______
Total 25,580
______ 25,580
______

ANSWERS
bank reconciliation statement of …..
Balance as per cash book (dr) 274
Less:
Cheques deposited in the Bank but not cleared 477 477
Add:
Cheques drawn but not presented for payment 730 730
_____
Balance as per pass book (cr) 527
_____
Here Total amount of the R’s acceptance = 1,000
Amount paid = 500
Amount of the renewed bill = Rs. 500
Later on, R became insolvent and 40% of the amount could be recovered from his estate.
Amount recovered = 40% of 500 = Rs. 200
Bad debts = 500 – 200 = Rs. 300.

Here A of Allahabad sent on consignment to B of Bareilly 1,000 transistors costing Rs. 80 each. A paid
freight amounting to Rs. 1,000 and cartage Rs. 45. B received only 900 sets as 100 sets were destroyed in
transit. So this is abnormal loss.
Valuation of damage
Cost of 1000 transistors sent = 80000
Add:freight and insurance = 1,000
Add:cartage = 45
So the cost of 15 packets destroyed = 81,045 × 100/1,000 = Rs. 8,104.50
42. Value of Stock just before being unloaded at the consignees godown
consignee. Since the goods have reached the consignees godown, we can consider the consignor expenses
on the goods to have been incurred. Moreover any direct expenses incurred by the consignee in relation
to the transportation of the goods, octroi duties, insurance in transit etc., would also have to be considered
as having been incurred on the goods.
Now the cost of the 200 chairs received by the consignee = 60,000
Rs.
Add:clearing charges = 800 (700 + 100)
Total cost = 60,800
Total units sold = 50 chairs
Units remaining in inventory = 50
So the value of inventory = 60,800/200 × 50 = Rs. 15,200.

ANSWERS
Joint venture A/c
To C-purchases 80,000 By D-sales 1,88,500
To C-reconditioning expenses 43,500
To C-purchase commission 2,000
To C-miscellaneous exp. 250
To D-railway freight 7,500
To D-octroi 3,750
To D-insurance 1,500
To D-garage rent 2,500
To D-brokerage 6,850
To D-other expenses 4,500
C
D ________ ________
1,88,500
________ 1,88,500
________
To net Profit transferred 40,000 By Profit before adjustments 40,000
A. (40,000 × 5/10 = 20,000) – 500
= 19,500
B. (40,000 × 4/10 = 16,000) – 500
= 15500
C. 5,000
C’s share in the profit before adjustment comes to 40,000 × 1/10 = 4,000.

So the amount to be sacrificed by A and B equally to make C’s profit as 5000Rs. Will be = 5,000 – 4,000
= Rs. 1,000
A’s sacrifice = 500
B’s sacrifice = 500
45. Interest on capital @ 6%:
Raja 1,20,000 × 6% = 7,200
Roopa 90,000 × 6% = 5,400
Mala 60,000 × 6% = 3,600
Interest on capital credited wrongly at 5%:
Raja 1,20,000 × 5% = 6,000
Roopa 90,000 × 5% = 4,500
Mala 60,000 × 5% = 3,000
Thus Raja’s account was credited less by (7,200 – 6,000) = Rs. 1,200
And Roopa’s account was credited less by (5,400 – 4,500) = Rs. 900
And Mala’s account was credited less by (3,600 – 3,000) = Rs. 600
So the adjusting ebtry will be
Interest on partners account….dr 2,700
To Raja’s Current A/c….cr 1,200
To Mala’s Current A/c….cr 900
To Roopa’s Account…..cr 600
A 3/6 3/6 of 1/6 = 3/36 3/6 – 3/36 = 15/36
B 2/6 2/6 of 1/6 = 2/36 2/6 – 2/36 = 10/36

ANSWERS
C 1/6 1/6 of 1/6 = 1/36 1/6 – 1/36 = 5/36

D 1/6 = 6/36 6/36
So the new ratio between A , B, C an D is 15 : 10 : 5 : 6.
A 4/5 ¼ of 4/5 = 1/5
B 1/5 ½ of 1/5 = 1/10
C
So the sacrificing ratio between A and B is 2 : 1.
48. Under average profits method goodwill is calculated on the basis of the average of some agreed number
(c) Non operating incomes e.g. Income from investments etc should be deducted from the net profits of
that year.
loss for the year 2 : (20,000)
Profit for the year 5 : 80,000
Average profit of last 5 years = (40,000 – 20,000 + 10,000 + 60,000 + 80,000)/5 = Rs. 34,000
Goodwill = 34,000 × 3 = Rs. 1,02,000

Here profit for the year = 72,000
Thus capitalized value of profit = 72,000 × 100/10 = 7,20,000
Capital employed = assets – current liabilities = 9,70,000 – 4,00,000 = 5,70,000
Thus Goodwill = 7,20,000 – 5,70,000 = Rs. 1,50,000
50. Bill payable discounted in cash by supplier will not affect us. It will be recorded by supplier not by us.
the firm.
Here C’s share in profit is 1/5th
The combined capital of A and B = 24,000 + 16,000 = Rs. 40,000
This combined capital constitutes 4/5 th of the total capital
So total capital of the firm will be = 40,000 × 5/4 = Rs. 50,000
Thus C’s capital will be = 50000/5 = Rs. 10,000
52. Here capital brought in by Z = 1/3rd of total capital = 75,000
Thus total capital = 75,000 × 3 = Rs. 2,25,000
Thus combined capital of X and Y = 2,25,000 × 2/3 = Rs. 1,50,000
Thus X’s share = 1,50,000 × 3/5 = Rs. 90,000
So cash to be paid back to X = 1,20,000 – 90,000 = Rs. 30,000

ANSWERS
Reserve account.
share = nil
amount forfeited per share = 400 × (8) = Rs. 3,200
The surplus amount to be transferred to capital reserve account = Rs. 3,200
54. This is the case of Reissue of forfeited shares at premium and at par, originally issued at par
In this case the whole of the amount that has been credited to Shares Forfeited A/c is transferred to
Capital Reserve A/c on the reissue of such shares.
Given that D Ltd. forfeited 800 shares of Rs. 10 each fully called up, on which the holder has paid only
application money of Rs. 3 per share. Out of these 500 shares were reissued as Rs. 11 per share fully
paid up.
The amount available in shares forfeited account for the shares reissued will be = 500 × 3 = Rs. 1,500
55. Total value of business purchased = Rs. 90,000
Amount to be paid by issue of shares = 90,000
Value per share = Rs. 9
Thus number of shares to be issued = 10,000 shares
56. Remaining amount to be paid by issue of 12% debentures = 4,00,000 – 1,30,000 = 2,70,000
Value per debenture after discount = Rs. 90
Thus number of debentures to be issued = 2,70,000/90 = 3,000 debentures
Face Value of debentures issued = 3,000 × 100 = Rs. 3,00,000
Thus Discount amount will be = 3,00,000 – 2,70,000 = Rs. 30,000.
57. Loss will be 2,000 × Rs. 100 × .02 + 2,000 × Rs. 100 × .05 = Rs. 14,000.
Here dividend payable will be 15% of (Equity share capital called up – Calls in arrear ) = 15% of
(1000000 – 10000) = Rs. 1,48,500
59. Profit or loss is equal to closing capital + drawing less (addition during year and opening capital).

Here On 1st January 2010, Badri of Kanpur consigned 100 cases, cost price Rs. 7,500, at a proforma
invoice price of 25% profit on sales to his agent Anil of Allahabad. The entries to be passed are
1. For the goods sent on consignment (at invoice price)
Consignment to .........A/c ...Dr. 10,000
To Goods sent on consignment A/c 10,000
(7500/0.75)
2. To reverse the extent of loading
Goods sent on consignment A/c 2,500
To Consignment to .........A/c 2,500
(25% of 10000)
3. For goods sent on consignment transferred to trading
account (by a manufacturing company) or purchase
account (by a trader)
Goods sent to consignment A/c ... Dr. 7,500
To trading A/C 7,500

ANSWERS

1. Amount spent is capital expenditure as it has increased ful efficiency of Rings and Pistons.
2. Bad debts is in nature of expense, hence nominal account.
3. Expired portion of capital expenditure is expense. Unexpired is an asset to be shown in balance sheet.
4. The maturity date will be 33 (30 + 3) days after date of acceptance i.e. 11.10.2011.
5. Payment of personal tax of partners by firm will be considered as their drawings.
6. Debentures is a liability and thus has a credit balance. Carriage inward, prepaid insurance, bills receivable
all have debit balances.
7. Depreciation @ 10% for half year = Rs. 5,000. loss on sale = 31,000 (Rs. 95,000 less Rs. 64,000).
8. Three column cash book records cash, bank and discount.
9. Value of an asset after reducing depreciation is called book value.
10. Trial balance may be prepared by all the methods.
11. Selection of accounting policy is based on prudence, substance over form and materiality.
12. Current cost, Historical cost and Realizable value all are valuation principles.
13. Profit/loss on revaluation is shared among the old partners in old profit ratio.
14. At first, revaluation account is prepared at time of admission of a partner for revaluation of assets/
liabilities.
15. Amount payable is received by executor of the dead partner.
16. Rate of depreciation is 9%. Rs. 450 per year (Rs. 4,500/10).
17. Cheque deposited in bank but not credited are added to the pass book balance while preparing bank
reconciliation statement.
18. Debit balance of cash is an asset.
19. Dividend collected by bank will be added in bank reconciliation statement in the given case.
20. Remaining partners contribute to such compensation amount in their gaining ratio.
21. If the partners don’t wish to change values of assets and liabilities in the new balance sheet, they open
memorandum revaluation account.
22. Shares of private companies are not listed in any stock exchange. Shares of public companies are listed.

23. A balance sheet is also known as the statement of financial position tells about the assets, liabilities and
equity of a business at a specific point of time. It is a snapshot of a business.
A balance sheet is an extended form of the accounting equation. An accounting equation is:
Assets = Liabilities + Equity
MR.X
Balance Sheet as on December 31st,2009
Liabilities Amount Assets Amount
Capital 1,65,000 Plant and machinery 60,000
Add: Net profit
Less: Drawings Furniture 10,000
(1,55,000 + 22,000 – 12,000)
Bills payable 10,000 Goodwill 70,000
Bank overdraft 15,000 Investments 25,000
Trades payable 45,000 Closing inventory 25,000
Outstanding expenses 5,000 Trade receiveble 35,000
Bills receivables 9,000
Cash 6,000
Total 2,40,000 Total 2,40,000
Cost of goods sold = opening inventory + purchases – closing inventory = 19,000
Gross Profit = sales – cost of goods sold = 30,000 – 19,000 = Rs. 11,000
25. Net profit is calculated by subtracting a company’s total expenses from total revenue, thus showing what
the company has earned (or lost) in a given period of time (usually one year) also called net income or net
earnings.
Here net profit = gross profit – salaries – interest on overdraft – office expenses – rent paid – general
expenses – advertisement + commission received = 35,000 – 4,000 – 200 – 5,000 – 2,000 – 5,100 – 5,000
+ 4,000 = Rs. 17,700.
26. income tax paid on behalf of the proprietor will b e treated as drawings and will be deducted from the
capital of the proprietor.
Here Capital 50,000 Income tax paid 10,000 and Income tax advance payment is Rs. 1,600.
So Capital A/c balance will be = 50,000 – 10,000 – 1,600 = Rs. 38,400.

ANSWERS
probable bad debts.
In accounting, provision for discount on trade receivables shows the reserve amount for adjusting loss
due to discount allowed to our trade receivables. Every businessman wants to get money faster from
their customer. So, businessman accepts less money than actual from those customers who will pay
before maturity of debt. So, at the end of year, we make provision for next year losses due to discount
allowed. So, these provision will be called provision for discount on trade receivables.
Here Trade receivables = 30,000
Less:provision for bad debts = 5% of 30,000 = 1,500
= 28,500
So provision for discount on trade receivables = 2% of 28,500 = Rs. 570.
28. Claim for compensation under dispute is contingent liability.
as Accrued expenses or outstanding expenses.
Here the interest on loan due = 9% of 10,000 = Rs. 900
Interest on loan paid = 600
Thus Outstanding interest on loan will be Rs. 300
the unsold goods must be included in the inventory at cost. When the goods sent on sale or approval basis
are treated as sale, for the goods not yet approved, the sale entry is reversed at the year end.
Here Included in the sales were sale of goods of Rs. 5,000 on “Sale on approval” basis for which consent
of the customer was not received upto Dec. 31st. Thus this entry will be reversed and the amount will be
included in inventory at cost.
Here inventory at sale price = Rs. 5,000
Cost + 25% of cost = 5,000
Or
125% of cost = 5,000
Inventory on approval will be = Cost = 5,000/125% = Rs. 4,000

31. Opening balance of tools = 4,320
Add: Tools purchased = 1,440
Less closing balance of tools account = 4,680
Depreciation = Rs. 1,080
32. Calculation of interest on loan
Date Particulars Amount Interest @ 9% pa
30.9.2009-30.12.2009 Amount of loan 15000 337.5
30.6.2009-30.9.2009 Amount of loan 15000 + 5000 450
1.1.2009-30.6.2009 Amount of loan 20000 + 4000 1080
Total 1867.5
figure is recorded in the correct head of account. Whatever the reas on may be, there is always a chance
Here bills received was passed through bills payable so bills received account is undercasted and bills
payable account is overcasted .
So the rectification entry will be
B/R A/c Dr. 1,000
B/P A/c Dr. 1,000
To suspense 2,000
figure is recorded in the correct head of account.Whatever the reason may be, there is always a chance
Here an item of purchase of Rs. 151 was entered in the Purchase Book as Rs. 15 and posted to
Suppliers A/c as Rs. 51 thus purchase account is undercasted by 151 – 15 = 136Rs. And supplier
account has been undercasted by 151 – 51 = Rs. 100 rectifying entry will be
Purchase A/c Dr. 136
To Suppliers A/c 100
To Suspense A/c 36

ANSWERS
35. Miscellaneous expenses should come on debit side instead of credit side. so the difference in trial balance
is due to wrong placing of this account.
To net Profit transferred 7,800 By Profit after intereston capital 7,800
Sita-7,800 × 3/5 = 4,680
Gita-7,800 × 2/5 = 3,120
______ ______
7,800 7,800
______ ______
Less:
B/P paid by Bank not entered in cash Book 800 800
Add:
______
Balance as per pass book(cr) 9,500
______

Add:
Less:
______
______
price.
Here Ram, the manager, is entitled to get a commission of Rs. 25 per article sold plus ¼th of the amount
by which the gross sales proceeds less total commission there on exceed a sum at the rate of Rs. 125 per
article sold. Ram sold 450 articles at Rs. 73,800.
Articles sold = 450
So basic commission = 450 × 25 = 11,250.
Let the total commission be x (say)
Extra commission = 1/4 (sales proceeds – x – 125 × articles sold) = 1/4 of (73,800 – x – 125 × 450)
Or x – 11250 = 1/4 (17,550 – x)
Or x – 11250 = 4,387.5 – x/4
Or x + x/4 = 4,387.5 + 11,250 = 15,637.5
Total commission = x = Rs. 12,510

ANSWERS
Consignment account
To goods sent on
consignment A/c(100 × 500) 50,000 By Nirmal-sales (60 × 700) 42,000
To bank-packing charges 2,000 By closing inventory 21,440
To bank-forwarding charges 400
To bank-freight 600
To nirmal-cartage 600
To Nirmal-godown charges 500
To Nirmal-commission
(6% of 42,000) 2,520
______ ______
63,400 63,400
______ ______
Valuation of closing inventory:
Cost of goods consigned = 50,000
Add: packing and dispatch = 2,000
Add: freight = 600
Add: forwarding charges = 400
Add: cartage by consignee = 600
Total cost = 53,600
normal loss.
No separate entry is made in the books of consignor in case of normal. such loss is considered while
calculating the cost of inventory left unsold with the consignee. The value of unsold stock on consignment
is increased because the value of stock is the proportion of the cost of the goods consigned and direct
expenses that the quantity of inventory bears to the total quantity of goods consigned as diminished by the
normal loss of goods.

Here PARIKH & CO. of Nagpur consigned D of Delhi 1,000 Kgs. of Oil @ Rs. 13 per Kg.
Consignor spent Rs. 750 on cartage, Insurance and freight. On the way due to leakage
50 kg. of oil was spoiled (Normal loss) D spent Rs. 500 on Octroi and carriage. His selling expenses
were Rs. 400 on 800 kg. of oil sold.
Units lost = 50 kgs
Closing inventory = 1,000 – 50 – 800 = 150 kgs
Cost of goods consigned = 13,000 + 750 + 500 = Rs. 14,250
Value of closing inventory = units of unsold inventory × (original cost of goods consigned + direct expenses)/
(total units – units lost)
= 150 × 14,250/950 = 2,250Rs.
Date Particular Amount Amount
Cost of machinery 1,35,000
Less Depreciation for 5 years on straight line basis
(1,35,000 – 5,000)/10 × 5 = 65,000
End of 5th year Wdv of the machinery 70,000
6th year Depreciation (70,000 – 5,000)/8 8,125
43. Goods returned to supplier will decrease balance in supplier’s a/c and will decrease purchases (add
profit).
44. A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new
entity and new assets by contributing equity. They exercise control over the enterprise and consequently
share revenues, expenses and assets.

ANSWERS
Joint venture A/c

To A- purchases 2,00,000 By B-sale 2,50,000
To A-commission 2,000
To B-commission 12,500
A-23667
B-11833
Closing capital =
Opening capital + profit + additional capital –drawings – interest on drawings
Profit = closing capital – opening capital – additional capital + drawings = 16,430 – 12,000 – 4,000 + 3,000
= Rs. 3,430
remaining partners. Following is the formula for calculating new ratio
New ratio
A 5/8 1/10 5/8 – 1/10 = 42/80
B 3/8 1/10 3/8 – 1/10 = 22/80
C 1/5 = 16/80
Thus the new profit sharing ratio is A : B : C = 4 2 : 22 : 16 = 21 : 11 : 8.

remaining partners. Following is the formula for calculating new ratio
New ratio
A 3/5 1/5 OF 3/5 = (3/25) 3/5 – 3/25 = 12/25
B 2/5 2/5 of 2/5 = (4/25) 2/5 – 4/25 = 6/25
C 7/25 7/25
Thus the new profit sharing ratio is A : B : C = 12 : 6 : 7.
48. Weighted average method : This method is a modified version of average profit method. In this method
each year profit is assigned a weight i.e. 1, 2, 3, 4 etc. Thereafter each year profit is multiplied by the
weight and find product. The total of products is divided by the total of weight. As a result we find the
weighted average profit. After this the value of goodwill is calculated to multiplied the weight average
profit into the agreed number of year’s purchase. Thus the goodwill is calculated as follows
Weighted average profit = Total product of profit/Total of weights
Value of goodwill = Weighted average profit × number of year of purchase
(Note : This method is used when we observe that there is a tendency to increase the annual profits.
Latest year profit is assigned the highest weight.)
Year Profits Weights Product
2005 43,000 1 43,000
2006 50,000 2 1,00,000
2007 52,000 3 1,56,000
2008 65,000 4 2,60,000
2009 85,000 5 4,25,000
total 2,95,000 15 9,84,000
Weighted average profit = 9,84,000/15 = 65,600
Value of goodwill = 65,600 × 2 = Rs. 1,31,200

ANSWERS
the firm.
Here Mohan’s share in profit is 1/5th
the combined capital of Ramesh and Suresh = 1,02,900 + 73,500 = 1,76,400.
This combined capital constitutes 4/5 th of the total capital
So total capital of the firm will be = 1,76,400 × 5/4 = Rs. 2,20,500
Thus C’s capital will be = 2,20,500/5 = Rs. 44,100.
period. The amount of closing stock (properly valued) is used to arrive at the cost of goods sold in a
periodic inventory system with the following calculation:
Opening stock + Purchases – Closing stock = Cost of goods sold
Here cost of goods sold = sales – margin = sales – 20% of sales = 2,70,000 – 20% of 2,70,000 = 2,70,000
– 54,000 = Rs. 2,16,000
Thus closing inventory = purchases – cost of goods sold = 3,00,000 – 2,16,000 = Rs. 84,000.
When a bill of exchange is dishonored, the holder can get such fact noted on the bill by a notary public.
The advantages of noting is that the evidence of dishonored is secured. The noting is done by recording
the fact of dishonored, the date of dishonor, the reason of dishonor, if any. For doing all this the notary
Here Total amount of the A’s acceptance = 2,500
Amount paid in cash = 1,000
Amount of the renewed bill = amount remaining + interest = 1,500 + 50 = Rs. 1,550
52. Ramesh, an employee gets a salary of Rs. 10,000.The goods withdrawn by Ramesh for personal use will
be debited to his salary Rs 6000at cost and the when he received Rs. 6,000 again in cash for salary he got
Rs (6,000 + 6,000 – 10,000) = 2,000 excess salary so it should be debited to salaries paid in advance as
per the matching principle.
53. Bills of exchange is a financial service, where the Bank purchases drawn bills, from the domestic trade
transactions, confirmed in particular with an invoice - with right of recourse to you - and credits you with

the amount of the bill of exchange less discount interest and additional costs related to the bill, accrued in
advance from the discount date to the bill payment term.
The bill was accepted by B on 1st January but was discounted on 4th February so,
Amount to be paid to bank on discounting at 12%pa = 30,000 × 12/100 × 2/12 = Rs. 600.
54. Amount received on application = 14,000 × 30 = Rs. 4,20,000
Amount received on allotment = 14,000 × 35 = Rs. 4,90,000
Amount received on first and final call = 13,800 × 35 = Rs. 4,83,000
Cash book balance will be = 4,20,000 + 4,90,000 + 4,83,000 = Rs. 1,39,3000
55. Share capital in case of forfeiture will be debited by Rs. 100 × 8 (2.50 + 2.50 + 3) = Rs. 800.
Reserve account.
share = 500 × 2 = Rs. 1,000.
amount forfeited per share = 500 × (8) = Rs. 4,000
The surplus amount to be transferred to capital reserve account = 4,000 – 1,000 = Rs. 3,000.
57. Total value of business purchased = Rs. 3,30,000
Amount to be paid by issue of 12% debentures = 3,30,000
Value per debenture at premium = Rs. 110
Thus number of debentures to be issued = 3,30,000/110 = 3,000 debentures
58. A company may issue debentures with the stipulation that the repayment of the debentures on maturity
will be made at premium.
The amount of the premium payable is debited to Loss on Issue of Debentures A/c at the time of issue
of debentures. This amount will also be written off in the same manner as is done in case of writing off
Discount on Issue of Debentures.

ANSWERS
So here the Loss on issue of debentures will be = 5% of 2,00,000 = Rs. 10,000

Amount of discount to be written off annually = Total amount of Discount/Number of years
Here On 1st Jan. 2010, a Limited Co. issued 14% Rs. 1,00,000 debentures at a discount of 6%
repayable at the end of 5 years.
Here Amount of discount to be written off annually
= 6,000/5 = Rs. 1,200
60. Here company issued debentures of the face value of Rs. 1,00,000 at a discount of 6% on
Jan. 1, 2004. These debentures are redeemable by annual drawings of Rs. 20,000 made on 31st Dec.
each year. The directors decided to write off discount based on the debentures outstanding each year.
31.12.2009 1,00,000 6,000 × 5/15 = 2,000
31.12.2010 80,000 6,000 × 4/15 = 1,600
31.12.2011 60,000 6,000 × 3/15 = 1,200
31.12.2012 40,000 6,000 × 2/15 = 800
31.12.2013 20,000 6,000 × 1/15 = 400
So Discount to be written off in the fifth year will be Rs. 400.

NOTES

NOTES

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BOARD OF STUDIES

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

Time : 4 hours Maximum Marks : 200

The test is divided into four sections.

SECTION – A : FUNDAMENTALS OF ACCOUNTING (60 MARKS)

1. An increase in owner’s capital is recorded by:

Common Proficiency Test (CPT) Volume - I 427

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428 Common Proficiency Test (CPT) Volume - I

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Common Proficiency Test (CPT) Volume - I 429

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24. Cash Sales 50,000

(a) Rs. 175,000 (b) Rs. 170,000

(a) Dr Salary and Cr Purchases A/c Rs. 10,000

(a) 105,000 (b) 120,000

430 Common Proficiency Test (CPT) Volume - I

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Common Proficiency Test (CPT) Volume - I 431

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(a) 1:1 (b) 3:2

Common Proficiency Test (CPT) Volume - I 433

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Common Proficiency Test (CPT) Volume - I 435

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64. The Right of Lien means:

436 Common Proficiency Test (CPT) Volume - I

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Common Proficiency Test (CPT) Volume - I 437

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(c) When the offeree offers to qualified acceptance of the offer

438 Common Proficiency Test (CPT) Volume - I

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Common Proficiency Test (CPT) Volume - I 439

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96. Partnership is the relation

101. Find the correct match of the following:

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Common Proficiency Test (CPT) Volume - I 441

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111. Structural unemployment results due to:

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Common Proficiency Test (CPT) Volume - I 443

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444 Common Proficiency Test (CPT) Volume - I

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Common Proficiency Test (CPT) Volume - I 445

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Qty. Variable Fixed Cost Total Cost Average Average Marginal

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Common Proficiency Test (CPT) Volume - I 447

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Use Table No.3 to Answer Questions 149 – 150

Unit of Labour Total Output Marginal Output

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161. The value of log 6 216 6 is equal to

(a) 7/2 (b) 5/2