JAIN COACHING CLASSES [B.R.

JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

Paper 1 - Principles and Practice of Accounting

MOCK TEST

Time : 3 Hours (1:30pm to 4:30pm) Marks :100

INSTRUCTIONS
1) Question 1 is compulsory.
2) Attempt any four questions from the remaining five questions.
3) Wherever necessary, suitable assumptions should be made and disclosed by way of note
forming part of the answer.
4) Working Notes should form part of the answer.

Question 1

(a) State with reasons, whether the following statements are True or False : (6×2 = 12 marks)
(i) If the errors are detected after preparing trial balance, then all the errors are rectified
through suspense account.
(ii) Withdrawal of cash from the business by the proprietor should be charged to profit and
loss account as an expense.
(iii) The value of human resources is generally shown as assets in the Balance Sheet
(iv) A person holding preference shares of a company cannot hold equity shares of the same
company.
(v) Business of partnership comes to an end on death of a partner.
(vi) A fixed charge generally covers all the assets of the company including future one.

(b) Differentiate between Provisions and Contingent Liabilities. (4 marks)

(c) The balance of Machinery Account of a firm on 1st April, 2020 was Rs. 28,54,000. Out of
this, a plant having book value of Rs. 2,16,090 as on 1st April, 2020 was sold on 1st July, 2020
for Rs. 82,000. On the same date a new plant was purchased for Rs. 4,58,000 and Rs. 22,000
was spent on its erection. On 1st November, 2020 a new machine was purchased for
Rs. 5,60,000. Depreciation is written off@ 15% per annum under the diminishing balance
method. Calculate the depreciation for the year ended 31st March, 2021. (4 marks)

Question 2

(a) The books of Meher were closed on Dec. 21, 2020 with a Suspense Account showing a credit balance
of Rs. 410. In 2021 the following errors were located:
(i) In November, 2020 the total of the Sales Book on one page was carried forward to the next page as
Rs. 26,130 instead of Rs. 21,630.

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

(ii) Furniture of the book value of Rs. 3,500 was sold for Rs. 4,100 to Lalwani but the amount was
entered in the Sales Book. In 2020, 10% depreciation was charged on the closing balance of all asset
accounts.
(iii) The total of the Discount Column (Cr.) for December, 2020, Rs. 240, was not posted in the
ledger.
(iv) Goods returned to Mehta in October 2020, costing Rs. 650, were not recorded in the books at all.
(v) Rs. 3,100 goods purchased from G. Sorabjee, a supplier, were debited to the account of C.
Sorabjee, a customer, the amount was correctly entered in the Purchases Book.
Pass journal entries to rectify the errors, prepare Suspense Account and make any comments that you
may have to make. (10 marks)

(b) ABC Limited supplied goods on sale or return basis to customers.

Goods are to be returned within 15 days from the date of dispatch, failing which it is treated as sales.
The books of BC Limited are closed on 31ss March, 2021. The particulars of the same are as under:

Date of Dispatch Party Name Amount Remarks

10.03.2021 PQR 25,000 No information till 31.03 .2021
12.03.2021 DEF 15,000 Returned on 16.03.2021
15.03.2021 GHI 40,000 Goods worth Rs. 8,000 Returned on 20.03.2021
20.03.2021 DEF 10,000 Goods Retained on 24.03.2021
25.03.2021 PQR 22,000 Goods Retained on 28.03.2021
30.03.2021 XYZ 35,000 No information till 31.03.2021

You are required to prepare the following accounts in the books of ABC Limited:
(i) Goods on sale or return, sold and returned day books
(ii) Goods on sales or return total account (5 marks)

(c) One of your clients Mr. X asked you to finalize his account for the year ended 31st March,2022. As
a basis for audit, Mr. X furnished you with the following statement:

Dr. Cr.
X's Capital 4,668
X's Drawings 1,692
Leasehold Premises 2,250
Sales 8,250
Due from customers 1,590
Purchases 3,777
Purchase Return 792
Loan from Bank 768
Trade Expense 2,100
Trade Payable 1,584
Bills Payable 300
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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

Salaries and Wages 1,800

Cash at Bank 678
Opening Inventory 792
Rent and Rates 1,389
Sales Return 294
16,362 16,362
The closing inventory was Rs. 1,722. Mr. X claims that he has recorded every transaction correctly
as the trial balance is tallied. Check the accuracy of the above trial balance and give reasons for the
errors, if any. (5 Marks)

Question 3

(a) Ramesh consigned 2,000 MT of chemicals at a cost of Rs. 800 per MT to John. Ramesh paid freight
and insurance charges of Rs. 20,000. Of the above 500 MT of chemicals were destroyed by fire during
transit. John cleared the balance of 1,500 MT of chemicals and sold 1,000 MT at an average price of
Rs. 1,000 per MT. John incurred the following expenses: Godown Rent Rs. 5,000, Insurance Rs. 3,000,
Clearing Charges Rs. 4,500. Insurance claim received against fire Rs. 4,00,000 after admitting the
salvage value of Stock destroyed by fire at Rs. 10,000. John was entitled to a commission of 10% on
sale proceeds. John send the balance to Ramesh after adjusting his commission and expenses out of the
sale proceeds. Prepare a Consignment Account and John's Account in the books of Ramesh.

(10 marks)

(b) The following is the Receipts and Payments Account of Mumbai Club for the year ended March 31,
2021:

Receipt and Payment Account of Mumbai Club

Receipts Amount Payments Amount

(Rs.) (Rs.)
Cash in hand 20,000 Ground man's Fee 75,000
Balance at Bank as per Purchase of Equipment’s 1,55,000
Pass Book:
Saving Account 1,93,000 Rent of Ground 25,000
Current Account 60,000 Club night expenses 38,000
Bank Interest 5,000 Printing and Office Expenses 30,000
Donations and Subscriptions 2,50,000 Repairs to Equipment 50,000
Entrance fees 18,000 Honorarium to Secretary 40,000
(2019-20)
Contribution to Club night 10,000 Balance at Bank as per Pass
Book:
Sale of Equipment 8,000 Saving Account 2,04,000

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

Bar Room receipts 20,000 Current Account 20,000

Proceeds from club night 78,000 Cash in hand 25,000
6,62,000 6,62,000

You are given the following additional information (All figures are in Rs.)
01.04.20 31.03.21
Subscription due 15,000 10,000
Amount due for printing etc. 10,000 8,000
Cheques unpresented being payment for 30,000 25,000
repairs
Interest not yet entered in the Pass book - 2,000
Estimated value of machinery and 80,000 1,75,000
equipment

For the year ended March 31, 2021, the honorarium to the Secretary is to be increased by a total
of Rs. 20,000 and Ground man is to receive a bonus of Rs. 20,000. Prepare the Income and
Expenditure Account for period ended 31st March, 2021 and the Balance Sheet as at that date.

(10 marks)

Question 4
(a) M/s. Seven Seas purchased a second-hand machine on 1st April, 2017 for Rs. 1,60,000.
Overhauling and erection charges amounted to Rs. 40,000. Another machine was purchased for
Rs. 80,000 on 1st Oct, 2017. On 1st Oct, 2019, the machine installed on 1st April, 2017 was sold
for Rs. 1,00,000. Another machine for Rs.30,000 was purchased and was installed on 31st
December, 2019. Under the existing practice the company provides depreciation @ 10% p.a. on
original cost. However, from 1st April, 2020 it decided to adopt WDV method and to charge
depreciation @ 15% p.a. You are required to prepare Machinery account for the years 2017 to
2021. (7 marks)

(b) From the following particulars of M/s Swapnil enterprises, prepare a Bank
reconciliation statement:
(1) Bank overdraft as per Pass Book as on 31st March, 2021 was Rs. 8,800
(2) Cheques deposited in Bank for Rs. 5,800 but only Rs. 2,000 were
cleared till 31st March.
(3) Cheques issued were Rs. 2,500, Rs. 3,800 and Rs. 2,000 during the
month. The cheque of Rs. 5,800 is still with supplier.
(4) Dividend collected by Bank Rs. 1,250 was wrongly entered as Rs.
1,520 in Cash Book.
(5) Amount transferred from fixed deposit A/c into the current A/c Rs.
2,000 appeared only in Pass Book
(6) Interest on overdraft Rs. 930 was debited by Bank in Pass Book and the

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

information was received only on 3rd April 2021.

(7) Direct deposit by M/s Rajesh Trader Rs. 400 not entered in Cash Book.
(8) Corporation tax Rs. 1,200 paid by Bank as per standing instruction appears in
Pass Book only. (7 marks)

(c) The following are the transactions that took place between X and Y during the
period from 1st October, 2020 to 31st March, 2021:

2020 Rs.
Oct.1 Balance due to X by Y 3,000
Oct 18 Goods sold by X to Y 2,500
Nov. 16 Goods sold by Y to X (invoice dated November, 26) 4,000
Dec.7 Goods sold by Y to X (invoice dated December, 17) 3,500
2021 Rs.
Jan. 3 Promissory note given by X to Y, at three months 5,000
Feb. 4 Cash paid by X to Y 1,000
Mar. 21 Goods sold by X to Y 4,300
Mar.28 Goods sold by Y to X (invoice dated April, 8) 2,700
Draw up an Account Current up to March 31st, 2021 to be rendered by X to Y, charging
interest at 10% per annum. Interest is to be calculated to the nearest rupee. (6 marks)

Question 5

(a) The following is the Balance Sheet of M/s. Diksha, Sambhav and Shubham Bros as at 31st
December, 2021

Balance Sheet as at 31st December, 2021

Liabilities ₹ Assets ₹ ₹
Capital Machinery 15,000
Diksha 12,300 Furniture 8,400
Sambhav 12,300 Fixtures 6,300
Shubham 13,500 Cash 4,500
General Reserve 4,500 Inventories 2,850
Trade payables 7,050 Trade receivables 13,500
Less: Provision for 900 12,600
Doubtful debts
49,650 49,650
rd
Shubham died on 3 January, 2022 and the following agreement is to be put into effect.
(a) Assets are to be revalued: Machinery to ₹17,550; Furniture to ₹6,900; Inventory to
₹2250.

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 JAIN COACHING CLASSES [B.R. JAIN]
Ph. No. : 98285-22345, 96725-22345, 0291-2652345

(b) Goodwill is valued at ₹9,000 and was to be credited with his share, without using a
Goodwill Account.
(c) ₹3,000 is to be paid to the executors of the dead partner on 5th January, 2022.

Required to show:
(i) The Journal Entry for Goodwill adjustment.
(ii) The Revaluation Account Capital Accounts and Balance Sheet
(iii) Which account would be debited and which account credited if Diksha and Sambhav
decided that the provision for doubtful debts in the Balance Sheet is to be eliminated.
(15marks)

(b) From the following transactions, prepare the Purchases Returns Book of Alpha & Co., a saree
dealer and post them to ledger : (5 marks)

Date Debit Particulars

Note No.
04.01.2018 101 Returned to Goyal Mills, Surat – 5 polyester sarees @ Rs 100.

09.01.2018 Garg Mills, Kota – accepted the return of sarees (which were purchased for
cash) – 5 Kota sarees @ Rs 40.

16.01.2018 102 Returned to Mittal Mills, Bangalore –5 silk sarees @ Rs 260.

30.01.2018 Returned one typewriter (being defective) @ Rs 3,500 to B & Co.

Question 6
(a) X Limited invited applications for issuing 75,000 equity shares of Rs. 10 each at a premium
of Rs. 5 per share. The total amount was payable as follows:
- Rs. 9 per share (including premium) on application and allotment
- Balance on the First and Final Call
Applications for 3,00,000 equity shares were received. Applications for 2,00,000
equity shares were rejected and money refunded. Shares were allotted on pro-rata
basis to the remaining applicants. The first and final call was made. The amount was
duly received except on 1,500 shares applied by Mr. Raj. His shares were forfeited.
The forfeited shares were re-issued at a discount of Rs. 4/- per share.
Pass necessary journal entries· for the above transactions in the books of X Limited. (15 Marks)

(b) "The cost of Property, Plant and Equipment comprises of any cost directly attributable to
bring the asset to the location and condition necessary for it to be capable of operating in
a manner intended by the enterprise". Give any five examples of such 'directly
attributable costs'. (5 Marks)

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