TUTORIALS™ MOCK TEST-2 ACCOUNTS FOR FOUNDATION 1

Instructions to Candidates

Questions No. 1 is compulsory.

Candidates are required to answer any four questions from the remaining five questions.

In case, any candidates answer extra question(s) /sub – questions(s) over and above the
required number, then only the requisite number of questions first answered in the answer book
shall be valued and subsequent extra question(s) answered shall be ignored.

Working notes should form part of the answer.

Wherever necessary, suitable assumptions may be made and indicated in the answer by the
candidates .
1. (i) State with reason when the following statements are true or false
(a) Real and Personal Accounts are closed at the end of accounting period.
(b) Depreciation Accounting is the process of valuation and not allocation.
(c) A Promissory note can be made payable to the bearer.
(d) Marshalling and Grouping has the same meaning.
(e) In a Cash Book, Discount Columns may show either debit balance or credit balance.
(f) Deferred revenue expenditure is current year’s revenue expenditure to be paid in the later years. 12 Marks

(ii) Rectify the following errors :

(a) A Cash Sale of goods of Rs. 3,000 to Krishan Posted to the credit of Kishan as Rs. 30,000.
(b) A Credit Purchase of old machinery from Sohan for Rs. 17,000 was entered in the Purchases Book as purchase
from Mohan for Rs. 71,000. Rs. 3,000 paid as Repair Charges of this Machinery debited to General Expenses
Account.
(c) An amount of Rs. 8,000 owing by a customer had been omitted from the list of Sundry Debtors.
(d) A Credit sale of old furniture to Rohan for Rs. 17,000 omitted to be posted.
(e) On 26th March, goods of the sale value of Rs. 2,00,000 were sent on sale or return basis to Gopal, a customer,
the period of approval being two weeks. He returned 20% of the goods and approved 80% of the remaining on
31st March. These goods were sent at a profit of 25% on Cost. 4 Marks
(iii) (b) Give any four points of difference between Fundamental Accounting Assumptions and Accounting Policies.
4 marks

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(i) The accounting year of Mr X ends on March 31, 2018 but the stock on hand was physically verified only on 15th
April. You are required to determine the value of closing stock (at cost) as on 31 st March from the following information:
(a) The physical stock (value at cost) was Rs. 50,000.
(b) The purchases from 1st April to 15th April amounted to Rs. 8,000 of which costing Rs. 1,000 were received on 16th
April.
(c) The sales from 1st April to 15th April amounted to Rs. 4,800 including the following:
(i) Goods sold for Rs. 800 at a loss of 20% on cost due to damage on 31st March.
(ii) Other sales are at a profit of 1/3rd of cost.
(iii) Goods (sold for Rs. 2,500) were delivered to the customers on 16 th April. 10 Marks
(d) (i) On 25th March, goods of the value of Rs. 10,000 were sent on sale or return basis to a customer, the period of
approving 80% of the rest, the customer was invoiced on 16th April. Mr. X sold these goods at a profit of 25% on
cost.
The sales referred to in (d) are not included in (c) above.

(ii) (a) ABC Ltd. Provides you the following information: 5 Marks
Date Particulars
The Machinery Account of ABC Ltd. had a debit balance of Rs. 6,84,000 on 1 st April, 2017

01.04.2015 Purchased 10 second hand machines of the same type and incurred Rs. 70,000 towards
freight & insurance, Rs. 20,000 towards carriage inward.
01.01.2016 Incurred Rs. 7,000 towards repairs and Rs. 3,000 on Installation of machines and Rs. 12,000
towards Annual Insurance Premium and commenced the commercial production.
01.10.2016 Sold one machine at a profit of 10%
01.01.2017 Incurred Rs. 10,000 on repairs of Machines
01.01.2018 Sold one machine at a loss of 10% and purchased a new machine for Rs 90,000 and spent Rs.
10,000 on its installation
Depreciation was annually provided on 31st March @ 20% p.a. on the written down value.
Calculate Purchase Price of 10 Machines as on 01.04.2015
(b) On 1st April 2017, ABC Ltd. purchased a machinery for Rs. 2,00,000 and incurred Rs. 14,000 towards freight and
insurance, Rs. 2,000 towards carriage inwards and Rs. 4,000 towards installation charges. It was established that

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the machinery will have a scrap value of Rs. 20,000 at the end of its useful life which is 4 years. Determine the
Amount of Depreciation for the year 2017-18 according to the Sum of Years’ Digits Method. 5 Marks

2. (i) X and Y had the following mutual dealings and desire to settle their account on the average due date:
01.01.2020 Balance owing by Mr X Rs. 5,000
30.01.2020 Goods sold to Y ( credit period 30 days) Rs. 1,000
31.01.2020 Goods purchased by X (credit period 1 month) Rs. 2,000
13.07.2020 Goods sold to Y (credit period 30 days) Rs. 1,000
28.09.2020 Good purchased by X (credit period 3 months) Rs. 1,000
Required: Ascertain the average due date. 6 Marks

(ii) From the following particulars, make up an Account Current to be rendered by Mr X to Mr Y on 31 st December, 2018
taking interest into account at the rate of 18% p.a.
01.07.2018 Balance owing by Mr Y Rs. 600
30.07.2018 Goods sold to Mr Y (Credit Period allowed 1 Month) Rs. 300
01.08.2018 Goods purchased from Mr Y (Credit Period received 1 month) Rs. 200
01.09.2018 Cash received from Mr Y Rs. 100
01.10.2018 Mr Y accepted Mr X’s Draft at 2 Months date Rs. 100
01.10.2018 Mr Y accepted Mr X’s Draft at 3 Months date Rs. 300
Required :- Prepare the Account Current. 6 Marks

(iii) ‘X’ supplied goods on sale or return basis to customer, the particulars of which are as under :
Date of Party’s Name Amount Rs. Remarks
Despatch
10.03.2018 ABC C. 10,000 No information till 31.03.2018
12.03.2018 DEF Co. 15,000 Retuned on 16.03.2018
15.03.2018 GHI Co. 12,000 Goods worth Rs. 2,000
Returned on 20.03.2018
20.03.2018 DEF Co. 16,000 Goods Retained on 24.03.2018
25.03.2018 ABC Co. 11,000 Goods Retained on 28.03.2018

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30.03.2018 GHI Co. 13,000 No Information till 31.03.2018

Goods are to be returned within 15 days from the date of dispatch, failing which it will be treated as Sales The Books of
‘X’ are closed on the 31st March, 2018.
Prepare the following account in the book of ‘X’ :
(i) Goods on Sales or Return, Sold and Returned Day Books.
(ii) Goods on Sales or Return Total Account
(iii) Year should be read as 2020 instead of 2018 .
3. From the following Trial Balance of Shri Shivam as on 31st March, 2018, you are required to prepare a Trading and
Profit and Loss Account for the year ended 31st March, 2018 and Balance Sheet as on that date, after making the
necessary adjustment as mentioned hereunder: 20 Marks
Particulars Debit Balance Credit Balance
Rs. Rs.
Capital & Drawings 24,000 1,60,000
Furniture and fixtures 8,000 -
Plant and machinery 60,000 -
Patents (ten years from 1.4.2017) 40,000 -
Opening stock 40,000
Purchases & Sales 1,70,000 2,64,000
Salaries 14,800 -
Wages 30,000 -
Sundry Debtors & Creditors 20,400 24,000
Land 28,350 -
Loan from shyam (at 6% from 1.10.2017) - 20,000
Postage and fax 3,000 -
Rent, rates and taxes 7,200 -
Bad debts 800 -
Discount - 1,200
Carriage inward 400
Interest on loan 300
Insurance 1,600
Traveling expenses 1,000
Sundry expenses 600
Cash & Bank 33,750
Bank overdraft - 15,000
Total 4,84,200 4,84,200
Adjustments :
(a) Closing stock is valued at Rs. 30,000
(b) A new machine was installed on 1st April, 2017 for Rs. 3,000. No entry in this respect was passed in the books.
Wages of Rs. 1,000 paid for installing the machine were debited to Wages Account.

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(c) Of the Sundry Debtors, Rs. 200 are bad and are to be written off. You are required to maintain a provision for
doubtful debts @ 5% on debtors and provision for discount on debtors @ 2%.
(d) Opening stock 40000 in T/B I.O 4000
(e) Good costing Rs. 2,000 were given away as free samples for publicity.
(f) Depreciate Plant and Machinery at 20% per annum and Furniture and Fixtures at 10% per annum.
(g) On 1.4.2017 machinery of the value of Rs. 10,000 was destroyed by fire and the insurance claim settled at Rs.
8,000 was credited to Machinery Account.
(h) Goods for Rs. 1,200 were sent to a customer at a profit of 20% on cost on 30th March, 2018 on sale or return basis.
This was recorded as actual sales.

4. (a) Record the Journal Entries for forfeiture and reissue of shares in the following cases assuming that the company
follows the policy of adjusting excess Application Money towards other sums due on shares :
(i) Forfeited 600 shares of Rs. 10 each issued at a premium of 30% to W who had applied for 1140 shares and paid an
application money of Rs. 5 (including Rs. 1 premium), for non – payment of allotment money of Rs. 5 (including Rs.
1 premium). At different intervals of time, out of these 100 shares were reissued to X as Rs. 8 called up for Rs. 7
per share, 100 shares were re-issued to Y as Rs. 8 paid up for Rs. 9 per share and 400 shares were re-issued to Z,
credited as fully paid for Rs. 9 per share.
(ii) Forfeited 600 shares of Rs. 10 each issued at a premium of 30% to W who had applied for 1500 shares for non –
payment of first and final call money of Rs. 3 (including Rs. 1 premium). At different intervals of time, out of these
400 shares were re-issued to Z, credited as fully paid for Rs. 9 per share and 100 shares were re-issued to X as Rs.
10 paid up for Rs. 11 per share. 10 Marks
(b) On April 1, 2018, Bharat Ltd. purchased a running business from Y Ltd. for Rs. 10,40,000 payable as to 25% by a
cheque and the balance by an issue of 12% Debentures of Rs. 500 each at a premium of 4% redeemable at a premium
of Rs. 30 per Debenture in three equal installments starting from the end of third year. The assets and liabilities
consisted of the following :
Building Rs. 6,00,000, Plant and Machinery Rs. 1,00,000, Inventories Rs. 2,00,000, Trade Receivables Rs. 1,80,000,
Trade Payables Rs. 80,000.
Interest is payable half yearly on 30th September and 31st March. Pass the necessary Journal Entries in the books of
Bharat Ltd. for the first (assume the rate of Tax deducted at source being 10%). 10 Marks
5. (a) The Balance Sheet of X, Y and Z sharing profits and losses in the ratio of 5 : 3 : 2 on 31 st December, 2017 is given
below:
Liabilities Rs. Assets Rs.
Sundry Creditors 12,000 Goodwill 10,000
Employees’ Provident Fund 6,000 Patents 52,000
Investment Fluctuation Reserve 7,000 Machinery 62,400
Workmen Compensation Reserve 7,000 Investments 6,000
X’s Capital 1,35,000 Stock 20,000
Y’s Capital 95,000 Sundry debtors 24,000
Z’s Capital 74,000 Less : Provision 4,000 20,000
Loan to Z 1,000
Cash at Bank 12,600
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Advertisement Expenditure 2,000

Profit & Loss A/c (2017) 1,50,000
3,36,000 3,36,000
Z retires from 1st May, 2018 and X and Y decide to share future profits losses in the ratio of 3:5. Z has withdrawn Rs.
10,000 during 2018. It was agreed that:
(a) Goodwill be valued at 2-1/2 years’ purchase of average of four completed years’ profits which were: 2014 Rs.
2, 02,000; 2015 Rs. 28,000; 2016 Rs. 32,000.
(b) Z’s Share of Profit from the closure of last accounting year till date of retirement be calculated on the basis of the
average of three completed years’ profits before retirement.
(c) Patents undervalued by Rs. 14,000 Machinery overvalued by Rs. 13,600, All Debtors are good. Rs. 1,000 included
in Sundry Creditors is not likely to arise. Unaccounted Accrued Income of Rs. 2,200 to be provided for. A debtor
whose dues of Rs. 400 were written off as bad debts paid 50% in full settlement. A claim of Rs. 1,000 on account
of Workmen’s Compensation to be provided for.
(d) Investments be sold for Rs. 8,200. Z was to be paid through Cash brought in by X and Y in such a way as to make
their capitals proportionate to their new profit sharing ratio of 3 : 5 assuming that a minimum Cash & Bank Balance
of Rs. 9,000 was to be maintained.
Prepare Revaluation Account, Capital Accounts of Partners and the Balance Sheet of New firm. 12 marks

(b) Star Mills Ltd. Surat, sends regular consignments of yarn to X who is the selling agent of the Mill and is entitled to a
commission of 10 paise per kg of yarn sold. This includes del credere commission. Following further information is
furnished to you: On 1st April 2017, stock of yarn with the agent 20,000 kg, costing Rs. 50,000. During the year ended
31st March, 2018. Total quantity of yarn consigned – 1,60,000 kg @ Rs. 3 per kg, Total quantity of yarn sold – 1,50,000
kg @ Rs. 3.75 per kg (these included that opening stock of 20,000 kg). total remittances by the Agent – Rs. 5,10,000,
Railway freight paid by the agent – Rs. 40,000. Of the sales made, X could not collect Rs. 11,000 due to the insolvency
of the customer. 5,000 kg of yarn were damaged in transit by Railway for which the agent recovered Rs. 6,000. The
damaged goods were sold at the rate of Rs. 1.50 per kg. Show the following Ledger Accounts in the books of Star Mills
Ltd. for the year ended 31st March, 2018.
(a) Consignment Account (b) Goods damaged-in-transit Account, and (c) X’s Account. 8 marks

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