VIDYA SAGAR

CAREER INSTITUTE LIMITED

CA Foundation – Principle & Practical of Accounting

Vol : 23 Date : 25.06.2023

ANSWERSKEY
Answer 1(a)
(i) False : A promissory note is an instrument in writing, not being a bank note or currency note
containing an unconditional undertaking signed by the maker to pay a certain sum of money only
to or to the order of a certain person. Under Section 31(2) of the Reserve Bank of India Act a
promissory note cannot be made payable to bearer.
(ii) True: Insurance Company generally do not cover normal loss as it is expected to be incurred on
each consignment or storage of goods.
(iii) False : While calculating the average due date, any transaction date may be taken as the base
date.

Answer 1(b).
Journal entries in the books of Eknath
Date Particulars Debit ` Credit
Jan. 1 Vilas A/c Dr. 10,000
To Bills Payable A/c 10,000
(Being the bill draws by him accepted)
Mar. 4 Bills Payable A/c Dr. 10,000
To Bank A/c 9,900
To Interest A/c (Discount A/c) 100
(Being retirement of acceptance 1 month before maturity,
interestallowedat12%p.a.)

Answer 1(c)
Distinctions between normal and abnormal loss

Normal loss Abnormal loss

Normal loss occurs due to inherent nature of Abnormal loss occurs mainly because of
the goods being shipped e.g. leakage, unforeseen events e.g. accident or natural
evaporation, loss of perishable goods etc. calamity etc.
Normal loss is not accounted for immediately
and is loaded on the remaining goods. It gets Abnormal loss is accounted for immediately
accounted for as cost of remaining goods as and in profit and loss account.
when they are sold.
As normal loss is added to cost of remaining Abnormal loss does not impact gross profit.
goods, it impact gross profit.
Insurance companies generally do not cover Insurance is generally available for abnormal losses.
normal loss as it is expected to be incurred on each
consignment or storage of goods.
Normal loss is almost certain however it may Abnormal loss is because of unforeseen events
vary from time to time. and is not certain.

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Answer 2
Vikram Milk Foods Co. Ltd.

Consignment to Sonepuri Account

Particulars ` Particulars `
To Goods sent on By Sunder Stores
Consignment A/c
2,0001kg.tins@` 10 20,000 1,5001kg.tins@` 15 22,500
6,0001/2kg.pkts.@` 6 36,000 56,000 4,0001/2kg.pkts.@` 7 28,000 50,500
To Sunder Stores: By Insurance - Claim 450
Freight 1,440 By Profit & Loss A/c-
Rent and insurance 600 abnormal loss(Net) 65
Commission 2,525 4,565 By Inventory on 16,915
consignment A/c
To Profit & Loss A/c – 7,365
Profit
67,930 67,930

Sunder Stores, Sonepuri

Particulars ` Particulars `
To Consignment to Sonepuri By Consignment to
Account-Sales Proceeds 50,500 Sonepuri Account -
Freight 1,440
Rent& Insurance 600
Commission 2,525
By Bank(Bal.fig) 45,935
50,500 50,500
Working Notes:

(i) Sale value of total consignment:

2,0001kg.tins@` 15 30,000
6,0001/2kg.pkts.@` 7 42,000
72,000
(ii) Freight@2%ofabove 1,440
(iii) Inventories at the end:
450 1 kg. tins @ ` 10 (Selling Price ` 6,750) 4,500
2,000 1/2 kg. pkts. @ ` 6 (Selling Price ` 14,000) 12,000
16,500
Add: Freight 2% of (Selling Price ` 20,750) 415
16,915

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 (iv) Loss in transit:
Cost of 50 1 kg.tins @` 10 500
Freight @ 2% of Selling Price ` 750 15
Gross abnormal Loss 515
Less : Claim (450)
Net abnormal Loss 65

Answer 3 (a)
In the books of CE
Journal Entries
2016
Sept. 15 Trade receivable A/c Dr. 1,00,000
To Sales A/c 1,00,000
(Being the goods sent to customers on sale or return basis)
Return Inward A/c (Note 1) Dr. 40,000
Oct. 20 To Trade receivables A/c 40,000
(Being the goods returned by customers to whom
goods were sent on sale or return basis)
Dec. 31 Sales A/c Dr. 20,000
To Trade receivables A/c 20,000
(Being the cancellation of original entry of sale
in respect of goods on sale or return basis)
Dec. 31 Inventories with customers on Sale or Return A/c Dr. 15,000
To Trading A/c(Note3) 15,000
(Being the adjustment for cost of goods lying with
customers awaiting approval)
Note: (1) Alternatively, Sales account can be debited in place of Return In wards account.
(2) No entry is required for receiving letter of approval from customer.
𝑅𝑠.20,000 𝑥 100
(3) Cost of goods with customers= = Rs. 15,000

133 .33
Answer 3 (b)
Journal Entries in the books of B
Date Particulars Debit Credit
2016 ` `
Jan.1 Purchases account Dr. 10,000
To A’s account 10,000
(Being the goods purchased from A on credit)
A’s account Dr. 10,000
To Bills payable account 10,000
(Being the acceptance of bill given to A)
1-Mar Bills payable account Dr. 10,000
To Bank account 9,900
To Rebate on bills account 100
(Being the bill discharged under rebate @ 12% p.a.)
Working Note :
Calculation of rebate:
10,000x12/100x1/12=`100
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 Answer 4
In the books of Anil
Journal Entries
Date Particulars Debt Credit
2016 Amount Amount
1 5 April Bills receivable account Dr. 9,000
To Sanjay’s account 9,000
(Being acceptance received from Sanjay for mutual
accommodation)
2 8 April Bank account Dr. 8,820
Discount account Dr. 180
To Bills receivable account 9,000
(Being bill discounted with bank)

3 8 April Sanjay’s account Dr. 3,000

To Bank account 2,940
To Discount account 60
(Being one-third proceeds of the bill sent to Sanjay)
4 8 July Sanjay’s account Dr. 12,600
To Bills payable account 12,600
(Being Acceptance given)
5 8 July Bank account Dr. 2,220
Discount account (270×2/3) Dr. 180
2,400
To Sanjay’s account
(Being proceeds of second bill received from Sanjay)
6 Oct. 11 Bills payable account Dr. 12,600
12,600
To Sanjay’s account
(Being bill dishonoured due to insolvency)
7 Oct. 15 Sanjay’s account (6,000+2,400) Dr. 8,400
To Bank account 4,200
To Deficiency account 4,200
(Being insolvent, only 50% amount paid to Sanjay)

Answer 5 (a)
Mr. Paul in Account Current with Mr. Singh
(Interestto31st August,2016@10%p.a.)
Date Particulars Due Amount Days Product Date Particulars Due Amount Days Product
2016 Date ` 2016 Date `
June 11 To Sales A/c To June 11 1,020 81 82,620 June By Cash A/c June 500 77 38,500
June 20 Sales A/c To June 650 72 46,800 15 By Cash A/c 15 1,100 23 25,300
July 7 Sales A/c 20 700 55 38,500 Aug.8 By Balance of Aug.8 1,04,120
July 7 Aug.31 product
Aug.3 To Interest A/c 28.53 Balance c/d 798.53
Aug. 31
1
1,04,120 10
x
365 100
2,398.53 1,67,920 2,398.53 1,67,920
To Balance b/d 798.53

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Answer 5 (b)
In the books of S. Ltd
Journal Entries

Date Particulars L.F. ` `

2016
March 31 Return Inwards A/c (` 250 X 50) Dr. 12,500
To Trade receivables A/c 12,500
(Being the adjustment for 50 units of goods returned by
customers to whom goods were sent on sale or return basis)
March 31 Sales A/c (` 250 X 80) (Note 1) Dr. 20,000
To Trade receivables A/c 20,000
(Being the cancellation of original entry for sale in respect of 80
units of goods not yet returned or approved by customers)

March 31 Inventories with Customers on Sale or Return A/c Dr. 16,000

To Trading A/c 12,500
(Being the cost of goods sent to customers on approval or
return basis not yet approved, adjusted)

Note: (1) Quantity of goods lying with dealer as on 31.12.2016 = 200 – 50 – 70 = 80

Answer 6
Taking 10th January as the base date
Due Due Date No. of days from 10th Amount Product
Date (Actual) January. . . `
10th January 10th January 0 500 0
26th January 25th January 15 1,000 15,000
23rd March 23rd March 72 3,000 2,16,000
18th August 17th August 219 4,000 8,76,000
8,500 11,07,000

11,07,000
Average Due Date = 10th Jan. + = 10th Jan+ 131 days = 21st May
8500
January 21
February 28
March 31
April 30
110

(a) If the payment is made on 18th March rebate will be allowed for unexpired time from 18th March to
21th May i.e., 13 + 30 + 21 i.e. for 64 days. He has to pay the discounted value of the total
amount.
8 64
Discount = 8,500 x 64 = 680 x
x = Rs. 119.23
100 365 365
Amount to be paid on 18th March=` (8,500 – 119.23) = ` 8,380.77

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(b) If the payment is deferred to 14th July, interest is to be paid from 21th May to 14th July i.e.,
for 10 + 30 + 14 = 54 days.
8 54 54
Interest = 8,500 x x = 680 x = Rs. 100.6
100 365 365

The amount to be paid on 14th July.

8,500+100.6=8600.6

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