Bhagya Achievers Test Series

CA Foundation

Paper 1: Accounting

Total Marks: 50

Test 3: Detail test series

Time: 90 min.

Question1. (5 Marks)

Mr. Mandeep runs a factory, which produces detergents. Following details

were available in respect of his manufacturing activities for the year ended 31-
03-2024.

Opening work-in-progress (27,000 units) 78,000

Closing work-in-progress (42,000 units) 1,44,000
Opening inventory of Raw Materials 7,80,000
Closing inventory of Raw Materials 9,60,000
Purchases 24,60,000
Hire charges of Machinery @ Rs. 0.70 per unit
manufactured
Hire charges of factory 7,80,000
Direct wages-contracted @ Rs. 0.80 per unit
manufactured
and @ Rs. 0.40 per unit of closing W.I.P.
Repairs and maintenance 5,40,000
Units produced - 15,00,000 units

You are required to prepare a Manufacturing Account of Mr. Mandeep for the
year ended 31-03-2024.

Answer1. (5 Marks)

In the Books of Mr. Mandeep

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 Manufacturing Account for the Year ended 31.03.2024

Particulars Units Amount Particulars Units Amount

Rs. Rs.
To Opening 27,000 78,000 By Closing 42,000 1,44,000
Work- in-Process Work- in-
To Raw Process
Materials By Trading A/c 15,00,000 58,00,800
Consumed: – Cost of
finished goods
transferred
Opening
Inventory 7,80,000
Add: Purchases 24,60,000
32,40,000
Less: Closing (9,60,000) 22,80,000
Inventory
To Direct Wages
12,16,800
– W.N. (1)
To Direct
expenses:
Hire charges
on Machinery
– W.N. (2) 10,50,000
To Indirect
expenses:
Hire charges of
Factory
7,80,000
Repairs & 5,40,000
Maintenance 59,44,800 59,44,800

Working Notes:

(1) Direct Wages – 15,00,000 units @ Rs.0.80 = Rs. 12,00,000

42,000 units @ Rs.0.40 = Rs. 16,800

Rs. 12,16,800

(2) Hire charges on Machinery – 15,00,000 units @ Rs. 0.70 = Rs. 10,50,000

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Question2. (10 Marks)

Amar, Akbar and Antony are in partnership. The following is their Balance
Sheet as at March 31, 2024 on which date they dissolved their partnership.
They shared profit in the ratio of 5:3:2.

Liabilities Rs. Assets Rs.

Creditors 80,000 Plant and machinery 60,000
Loan A/c – Amar 20,000 Premises 80,000
Capital A/cs - Amar 1,00,000 Stock 60,000
Akbar 30,000 Debtors 1,20,000
Antony 90,000
3,20,000 3,20,000

It was agreed to repay the amounts due to the partners as and when the assets
were realised, viz.

April 15, 2024 Rs. 60,000

May 1, 2024 Rs. 1,46,000
May 31, 2024 Rs. 94,000

Prepare a statement showing how the distribution should be made under

maximum loss method.

Answer2. (10 Marks)

Statement of Distribution of Cash by ‘Maximum Loss Method’

Creditors Amar’s Amar Akbar Antony

Loan
Rs. Rs. Rs. Rs. Rs.
Balance due 80,000 20,000 1,00,000 30,000 90,000
15th April 2024 realised Rs.
60,000
Paid to creditors (60,000) - - - -

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Balance due 20,000 20,000 1,00,000 30,000 90,000
1st May, 2024 realised Rs.
1,46,000
Paid to creditors (Rs. 20,000 - - - -
20,000)
Paid to Amar’s loan(Rs. - 20,000 - - -
20,000)
Balance due (1) Nil Nil 1,00,000 30,000 90,000
Balance Rs.
1,06,000
Maximum Loss (1,00,000 +
30,000
+ 90,000 - 1,06,000) = Rs.
1,14,000
shared in Profit & Loss ratio (57,000) (34,200) (22,800)
5:3:2
43,000 (4,200) 67,200
Akbar’s deficiency shared by
Amar
& Antony in capital ratio (2,210) 4,200 (1,990)
100:90
Cash paid [2] 40,790 - 65,210
Balance due (3) [1-2] 59,210 30,000 24,790
31st May 2024 realised Rs.
94,000
Maximum Loss [59,210 +
30,000 +
24,790 - 94,000] = Rs. 20,000
shared
in 5:3:2 (10,000) (6,000) (4,000)
Cash paid (4) 49,210 24,000 20,790
Balance/Loss* on realisation 10,000 6,000 4,000
(3-4)

Question3. (5 Marks)

The profits and losses for the previous years are: 2020 Profit Rs. 10,000, 2021
Loss Rs. 17,000, 2022 Profit Rs. 50,000, 2023 Profit Rs. 75,000. The average
Capital employed in the business is Rs. 2,00,000. The rate of interest expected
from capital invested is 10%. The remuneration from alternative employment

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of the proprietor Rs. 6,000 p.a. Calculate the value of goodwill on the basis of 2
years’ purchases of Super Profits based on the average of 3 years.

Answer3. (5 Marks)

Total Profit for 3 years = (Rs. 17,000) + Rs. 50,000+Rs. 75,000= Rs. 1,08,000.

Average profits =

Average Profits for Goodwill = Rs. 36,000 – Proprietor Remuneration

= Rs. 36,000 – Rs. 6,000 = Rs. 30,000

Normal Profit=Interest on Capital employed

= Rs. 20,000 (i.e. Rs. 2,00,000 x10/100) = Rs. 20,000

Super Profit = Average Profit-Normal Profit = Rs. 30,000 – Rs. 20,000 = Rs.
10,000

Goodwill = Super Profit x No of years purchases = Rs. 10,000 x 2 = Rs. 20,000

Question4. (8 Marks)

Dr. Gulleria started private practice on 1st April, 2023 with Rs. 2,00,000 of his
own fund and Rs. 3,00,000 borrowed at an interest of 12 p.a. on the security of
his life policies. His accounts for the year were kept on a cash basis and the
following is his summarized cash account:

Receipts Rs. Payments Rs.

Own Capital 2,00,000 Medicines Purchased 2,45,000
Loan 3,00,000 Surgical Equipment 2,50,000
Prescription Fees 6,60,000 Motor Car 3,20,000
Visiting Fees 2,50,000 Motor Car Expenses 1,20,000
Lecture Fees 24,000 Wages and Salaries 1,05,000
Pension Received 3,00,000 Rent of Clinic 60,000
General Charges 49,000
Household Expenses 1,80,000
Household Furniture 25,000

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 Expenses on Daughter's 2,15,000
college admission
Interest on Loan 36,000
Balance at Bank 1,10,000
Cash in Hand 19,000
17,34,000 17,34,000

1/3rd of the motor car expenses may be treated as applicable to the private
use of car and Rs. 30,000 of salaries are in respect of domestic servants. The
stock of medicines in hand on 31st March, 2024 was valued at Rs. 95,000.

You are required to prepare his private practice income and expenditure
account and capital account for the year ended 31st March, 2024. Ignore
depreciation on fixed assets.

Answer4. (8 Marks)

Income and Expenditure Account for the year ended 31st March, 2024

Rs. Rs.
To Medicines consumed By Prescription fees 6,60,000
Purchases 2,45,000
Less: Stock on 31.3.24 (95,000) 1,50,000 By Visiting fees 2,50,000
To Motor car expense 80,000 By Fees from lectures 24,000
To Wages and salaries 75,000
(1,05,000 – 30,000)
To Rent for clinic 60,000
To General charges 49,000
To Interest on loan 36,000
To Net Income 4,84,000
9,34,000 9,34,000

Capital Account for the year ended 31st March, 2024

Rs. Rs.
To Drawings: By Cash/bank 2,00,000
Motor car expenses 40,000 By Cash/ bank (pension) 3,00,000
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(one-third of Rs. By Net income from 4,84,000
1,20,000) Household 1,80,000 practice (derived from
expenses Daughter’s 2,15,000 income and expenditure
Surgery A/c)
exp.
Wages of domestic 30,000
servants
Household furniture 25,000
To Balance c/d 4,94,000
9,84,000 9,84,000

Question5. (10 Marks)

The Balance Sheet of a Partnership Firm M/s Dutch and Associates consisted of
two partners P and Q who were sharing Profits and Losses in the ratio of 5 : 3
respectively. The position as on 31st March,2024 was as follows:

Liabilities Rs. Assets Rs.

P's Capital 4,10,000 Land & Building 3,80,000
Q's Capital 3,30,000 Plant & Machinery 1,70,000
Profit & Loss A/c 1,12,000 Furniture 1,09,480
Trade Creditors 54,800 Stock 1,45,260
Sundry debtors 60,000
Cash at Bank 42,060
9,06,800 9,06,800

On the above date, R was admitted as a partner on the following terms:

(a) R should get 1/5th of share of profits.

(b) R brought Rs. 2,40,000 as his capital and Rs. 32,000 for his share of
Goodwill.
(c) Plant and Machinery would be depreciated by 15% and Land & Buildings
would be appreciated by 40%.
(d) A provision for doubtful debts to be created at 5% on sundry debtors.

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(e) An unrecorded liability of Rs. 2,000 for repairs to Buildings would be
recorded in the books of accounts and trade creditors are to be increased
by Rs. 4,000.
(f) Immediately after R’s admission, Goodwill brought by him would be
adjusted among old partners. Thereafter, the capital accounts of old
partners would be adjusted through the current accounts of partners in
such a manner that the capital accounts of all the partners would be in their
profit sharing ratio.

Prepare revaluation A/c, capital Accounts of the partners, new profit sharing
ratio and Balance Sheet of the firm after the admission of R.

Answer5. (10 Marks)

Revaluation A/c

Rs. Rs.
To Plant & Machinery 25,500 By Land & 1,52,000
(1,70,000 x 15%) Building A/c
To Provision for Bad &
Doubtful Debts (60,000 x 3,000
5%)
To Outstanding Repairs to
2,000
Building
To Trade Creditors 4,000
To P’s Capital A/c (5/8) 73,438
To Q’s Capital A/c (3/8) 44,062
1,52,000 1,52,000

Partners Capital A/c

P Q R P Q R
To P’s - - 20,000 By Balance 4,10,000 3,30,000 -
Capital A/c b/d
To Q’s 12,000 By 73,438 44,062 -
Capital A/c Revaluation
A/c
To Q’s - 68,062 By Profit &70,000 42,000 -

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Current A/c Loss A/c
To Balance
6,00,000 3,60,000 2,40,000 By Bank - - 2,72,000
c/d
By R’s 20,000 12,000 -
Capital A/c
By P’s 26,562 - -
Current A/c
6,00,000 4,28,062 2,72,000 6,00,000 4,28,062 2,72,000

Calculation of New Profit Sharing Ratio and gaining ratio:

R’s Share of Profit = 1/5 = 2/10

Remaining Share = 1 – 1/5 = 4/5

P’s Share = 5/8 x 4/5 = 20/40 = 5/10

Q’s Share = 3/8 x 4/5 = 12/40 = 3/10

New Profit sharing Ratio = 5:3:2

Gaining ratio = 5:3 (same as old profit sharing ratio among old partners)

Balance sheet of M/s Dutch and Associates as on 31.3.2024

Liabilities Rs. Assets Rs.

Capital Accounts: Land & 3,80,000
Buildings
Add:
Appreciation
1,52,000 5,32,000
P 6,00,000 Plant & 1,70,000
Machinery
Q 3,60,000 Less: 25,500 1,44,500
Depreciation
R 2,40,000 12,00,000 Furniture 1,09,480
Q’s Current A/c 68,062 Stock 1,45,260
Trade Creditors 58,800 Sundry 60,000
Debtors

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Outstanding Repairs 2,000 Less: Provision 3,000 57,000
to Building
Cash at Bank 3,14,060
P’s current A/c 26,562
13,28,862 13,28,862

Working Note:

Required Balance of Capital Accounts

R’s Capital after writing off Goodwill = 2,72,000 – 32,000 = 2,40,000

R’s Share of Profit = 1/5

Thus Capital of the firm shall be = 2,40,000 x 5 = 12,00,000

P’s Capital = 12,00,000 x 5/10 = 6,00,000 and

Q’s Capital = 12,00,000 x 3/10 = 3,60,000

Question6. (10 Marks)

X, Y and Z were in a firm sharing profit and loss as 3: 2: 1. Their Balance Sheet
on 31st March, 2024 was as follows:

Liabilities Amount Assets Amount

(Rs.) (Rs.)
X’s Capital 78,000 Goodwill 12,000
X’s Capital 42,000 Patents 30,000
Z’s Capital 31,000 Machinery 60,000
Investment Investment (Market value 25,000
Rs. 27,600)
Fluctuation Fund 6,000 Stock 30,650
Workmen’s
Compensation 12,000 Debtors 50,000
Trade Creditors 31,000 Less: Provision for
Employee’s doubtful debts 4,000 46,000
Provident
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 Found 12,000 Cash at Bank 8,350

2,12,000 2,12,000
Z retired on the above date on the following terms:

1. Goodwill of the firm was valued at Rs. 60,000.

2. Value of patents was to be reduced by 20% and that of machinery to 90%.
3. Provision for doubtful debts was to be raised to 10%.
4. Liability on account of Provident fund was only Rs. 6,000.
5. Liability for workmen compensation to the extent of Rs. 6,000 is to be
created.
6. Z took over the investment at market value.
7. Amount due to Z is to be settled on the following basis- 50% on retirement,
50% of the balance within one year and the balance by a bill of exchange
(without interest) at 3 months.

You are required the following:

(i) Show entries for the treatment of goodwill,

(ii) Prepare Revaluation Account,
(iii) Partner Capital Account, &
(iv) Balance Sheet.

Answer6. (10 Marks)

(i) Entries for the treatment of goodwill

Total goodwill of firm is Rs. 60,000

Z’s share (1/6 x Rs. 60,000) =Rs. 10,000

(a) X’s Capital A/c Dr. 6,000

Y’s Capital A/c Dr. 4,000

Z’s Capital A/c Dr. 2,000

To Goodwill A/c 12,000

(Being existing goodwill written off)

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(b) X’s Capital A/c Dr. 6,000

Y’s Capital A/c Dr. 4,000

To Z’s Capital A/c 10,000

(Being Z’s share of goodwill credited to him and debited to gaining partners in
gaining ratio)

(ii) Revaluation Account

Rs. Rs.
To Patents A/c 6,000 By employee provident fund A/c 6,000

To Machinery A/c 6,000 By Investments A/c 2,600

To Provision for 1,000 By Revaluation Loss Partners’ 10,400
Bad Debts A/c
Capital A/cs –
To workmen’s 6,000 X 5,200
compensation* Y 3,467
Z 1,733
19,000 19,000

(iii) Partners’ Capital Account

X Y Z X (Rs.) Y (Rs.) Z (Rs.)

(Rs.) (Rs.) (Rs.)
To Goodwill 6,000 4,000 2,000 By Balance b/d 78,000 42,000 31,000
To Revaluation 5,200 3,467 1,733 By Investment 3,000 2,000 1,000
To A/c 27,600 Fluctuation
Fund
Investments
To Z’s Capital 6,000 4,000 By X’s Capital 6,000
A/c
To A/c 5,334 By Y’s Capital 4,000
A/c
To Bank A/c 2,667
Z’s Loan
A/c
To Bills 2,666
Payable A/c
To Balance c/d 63,800 32,533
81,000 44,000 42,000 81,000 44,000 42,000

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(iv) Balance Sheet as on 1stApril, 2024

Liabilities Rs. Rs. Assets Rs. Rs.

Capital accounts: Patent 24,000
X 63,800 Machinery 54,000
Y 32,533 96,333 Closing stock 30,650
Z’s loan account 2,666 Sundry debtors 50,000
Trade creditors 31,000 Less: Provision(5,000) 45,000
for
Bills payable 2,667 bad debts
Workman Cash and bank 3,016
compensation 18,000 balances
Employee 6,000
Provident
Fund
1,56,666 1,56,666

Working Notes:

1. Gaining ratio of existing partners:

X 3/5-3/6=3/30

Y 2/5-2/6=2/30

Question7. (2 Marks)

True and false

The manufacturing account is prepared to ascertain the profit or loss on the

goods produced.

Answer7. (2 Marks)

False: The objective of preparing manufacturing account is to determine

manufacturing costs of finished goods for assessing the cost effectiveness of
manufacturing activities.

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