Accounting

Mock Test - Answers

1. a.

i) True. In case of deposits in MNTL, the deposit money is deferred over a period of time

ii) False. The aim of the accounting is to keep systematic record to ascertain the financial
performance and position of the company and to communicate the same with both internal
as well as external users of the company. Since Members represents internal users alone,
the given statement is incorrect

iii) True. Overstatement of closing stock refers to increased stock of goods lying unsold
during the year, which leads to reduction in Cost of Goods Sold. Due to the above reasons
Net profit tends to be overstated.

iv) False. Old reserves of the Partnership firm have to be distributed back to the old partners
of the firm in their profit sharing ratio.

v) False. In case of Pro-rata allotment where shares are issued at premium, the excess
money received on application will be first adjusted to Capital a/c and then Securities
premium account.

vi) False. Receipts and Payments a/c in the books of NGO is equivalent to Cash book of
other entities and Income and Expenditure a/c of NGO is equivalent to Profit and Loss a/c
of other entities

1. b.

Bills of Exchange Promissory Note

A bill contains an order to pay A Promissory note contains only a
promise to pay certain sum of money
There are generally 3 parties (Drawer, There are only 2 parties (Maker and
Drawee and Payee) Payee)
A bill is accepted by Acceptor A promissory note is paid by Maker
A bill is drawn by Creditor A Promissory note is made by Debtor
The Drawer and Drawee may be same Parties cannot be same person
person
In Bills of Exchange, the liability of The liability of the maker is primary and
drawer is secondary and conditional. He absolute
will liable only in case the acceptor
didn’t honor the bill
A Bill of exchange can be accepted A Promissory note cannot be accepted
conditionally conditionally
In a Bill of exchange, notice of dishonor Notice of dishonor is not required in
must be given Promissory note
 In case of dishonor, Bill of exchange Noting and Posting is not required in
must be noted and protested case of dishonor of Promissory note

1. c. Computation of Loss to be debited in the Profit and Loss account of the Factory for
the year ended 31st March 2024

Machine Purchased on 01/04/2021:

Particulars Amount (₹)

Book Value on 01/04/2021 13,85,600
Less: Depreciation @ 10% for 1 Year (1,38,560)
Book Value as on 01/04/2022 12,47,040
Less: Depreciation @ 10% for 1 Year (1,24,704)
Book Value as on 01/04/2023 11,22,336
Less: Depreciation @ 10% for 5 (46,764)
months[Upto 01/09/2023]
Book Value as on 01/09/2023 10,75,572
Less: Sale Value of Machinery (4,52,890)
Loss on sale of Machinery to be debited in 6,22,682
Profit and Loss A/c

Machine Purchased on 01/04/2022:

Particulars Amount (₹)

Book Value on 01/04/2022 15,74,000
Less: Depreciation @ 10% for 1 Year (1,57,400)
Book Value as on 01/04/2023 14,16,600
Less: Depreciation @ 10% for 5 Months (59,025)
[Upto 01/09/2023]
Book Value as on 01/09/2023 13,57,575
Since there is no scrap value, whole amount
has to be treated as loss and debited to
Profit and loss A/c

2. a. Rectification journal entries in the books of Mr. Nantha.

S.NO. Particulars Dr. (₹) Cr. (₹)

(1) Suspense A/c Dr. 54
To Profit and Loss adjustment A/c 54
(Correction of error by which Purchase
account was over debited last year)
(2) Motor vehicles account Dr. 2,850
To Profit and Loss adjustment 2,850
A/c
 (Purchase of vehicle wrongly debited to
Salaries account, now rectified by
capitalization of ₹2,850 after
depreciation)
(3) Profit and Loss adjustment A/c Dr. 1,600
To Customer A/c 1,600
(Being Customer’s A/c credited with
goods not yet purchased by him)

Inventory A/c Dr. 1,280

To Profit and Loss Adjustment 1,280
A/c
(Cost of goods debited to Inventory and
credited to Profit and loss adjustment
account)
(4) Suspense A/c Dr. 198
To Profit and Loss Adjustment 198
A/c
(Excess posting to purchase last year,
now adjusted )
(5) Profit and Loss Adjustment A/c Dr. 2,782
To Mr. Nantha’s Capital A/c 2,782
(Balance of Profit and loss adjustment
A/c transferred to Capital A/c)
(6) Suspense A/c Dr. 252 252
To Mr. Nantha’s Capital A/c
(Balance of Suspense A/c transferred to
Capital A/c)

Profit and Loss adjustment A/c

Particulars Amount Particulars Amount
To Customer A/c 1,600 By Suspense A/c 54
To Mr. Nantha’s Capital A/c 2,782 By Motor Vehicle 2,850
(Transfer) A/c
By Inventory A/c 1,280
By Suspense A/c 198
4,382 4,382

Suspense A/c
Particulars Amount Particulars Amount
To Profit and Loss adjustment 54 To Mr. Nantha’s Capital A/c 252
A/c (Transfer)
To Profit and Loss adjustment 198
A/c
 252 252

2. b. Bank Reconciliation Statement as on 31st January, 2024

Particulars Dr. Cr.

(A) Overdraft as per cashbook 2,900
(B) a) Cheques issued but not yet presented for payment 1,350
Less: (To
Bharat)
b) Dividend and Interest collected by Bank 1,050
(C) a) Cheque deposited but not yet cleared (From Ram) 1,300
Add:
b) Bank Charges debited 20
c) Insurance premium as per instruction 250
d) Cheques dishonored not entered in cash book 500
e) Bill of exchange dishonored 2,000
2,400 6,970
(D) Overdraft as per Pass book 4,570
6,970 6,970

3. a.

In the books of Raj ltd

Projected Balance sheet as on 31st March,2024

Liabilities ₹ Assets ₹
Capital 10,00,000 Fixed Asset 4,00,000
Profit and loss A/c Additions 1,00,000
On 1/4/23 60,000 5,00,000
+ For the year 3,74,000 4,34,000 (-) Dep @ (50,000) 4,50,000
10%
Creditors (Trade) 1,10,000 Stock in trade 3,36,000
Sundry Debtors 2,00,000
Cash and bank balances 5,58,000
(W.N)

15,54,000 15,54,000

Working Notes:

1. Projected trading and profit and loss account for the year ended 31st March 2024

Particulars ₹ Particulars ₹
 To Opening Stock 3,00,000 By Sales 21,20,000
To Purchases 15,20,000 By Closing Stock 3,36,000
(Balancing Figure)
To Gross profit c/d 6,36,000
(30% on Sales)
24,56,000 24,56,000
To Sundry Expenses 2,12,000 By Gross profit b/d 6,36,000
(10% on sales)
To depreciation 50,000
To Net Profit (b.f.) 3,74,000
6,36,000 6,36,000

Cash and Bank A/c

1st April, 2023 to 31st March, 2024

₹ ₹
To Balance b/d 3,50,000 By Sundry Creditors 15,50,000
(₹ 1,40,000 + ₹ 14,10,000)
To Sundry Debtors 20,70,000 By Expenses 2,12,000
By Fixed Asset 1,00,000
By balance c/d (b.f.) 5,58,000
24,20,000 24,20,000

3. b.

In the books of X, Y and Z

Revaluation A/c
Particulars ₹ Particulars ₹
To Provision for 13,000 By Building 62,500
Doubtful Debts
To Machinery 33,750 By loss on
revaluation
To stock 27,750 X 2,000
Y 4,000
Z 6,000 12,000
74,500 74,500

Partner’s Capital A/c

Particulars X Y Z Particulars X Y Z
To loss on 2,000 4,000 6,0000 By Balance 1,75,000 2,50,000 4,00,000
revaluation b/d
 To Bank - - 9,04,000 By General 50,000 1,00,000 1,50,000
reserve
To Z’s Capital 1,20,000 2,40,000 - By X and Y - - 3,60,000
capital
To Balance 6,03,000 6,06,000 - By Bank 5,00,000 5,00,000
c/d
7,25,000 8,50,000 9,10,000 7,25,000 8,50,000 9,10,000
0

Bank A/c
Particulars ₹ Particulars ₹
To Balance b/d 62,500 By Z’s Capital 9,04,000
To X’s Capital 5,00,000 By Balance c/d 1,58,500
To Y’s Capital 5,00,000
10,62,500 10,62,500

Valuation of Goodwill:
Total profit of past 3 years = ₹ 7,20,000
Average profit = ₹ 7,20,000 / 3 = ₹ 2,40,000
Goodwill (3 Years purchase) = ₹ 2,40,000 * 3 = ₹ 7,20,000
Z’s Share = (3/6)th = ₹ 7,20,000 * (1/2) = ₹ 3,60,000

Journal entry for Adjustment of Goodwill

X’s Capital A/c Dr. ₹ 1,20,000
Y’s Capital A/c Dr. ₹ 2,40,000
To Z’s Capital A/c ₹ 3,60,000
(Being Goodwill adjusted through Partners Capital A/c as per gaining ratio)

4. a.
Statement of Distribution of Cash
Realization Trade Loans Partners’ Capitals
Creditor from
partners
Ram Jaanu Siva Total
₹ ₹ ₹ ₹ ₹ ₹ ₹
Balances due (1) 2,800 1,400 13,440 8,400 11,760 33,600
(i) Sale of Patent 1,400 (1,400) -
1,400 1,400
(ii) Sale of 2,800 (1,400) (1,400)
furniture
(iii) Sale of 1,680
 machinery

Maximum possible ₹ 31,920 (15,960) (9,576) (6,384) (31,920)

loss (total of
capitals ₹ 33,600
less cash
available
₹ 1,680) allocated
to partners in the
profit sharing
ratio
i.e. 5 : 3 : 2
Amounts at credit (2,520) (1,176) 5,376 1,680
Deficiency of Ram 2,520 1,176 (3,696) -
and Jaanu written
off against Siva
Amount paid (2) – – 1,680 1,680
Balances in 13,440 8,400 10,080 31,920
capital accounts
(1 – 2) =
(3)
(iv) Sale of stock 5,600
Maximum 26,320
possible loss
(₹ 31,920 – ₹
5,600)
allocated (13,160) (7,896) (5,264) (26,320)
to partners in
the ratio
5:3:2
Amounts at
credit and cash 280 504 4,816 5,600
paid (4)
Balance in capital 13,160 7,896 5,264 26,320
accounts left
unpaid—
Loss (3 – 4) = (5)

4. b.
Income and Expenditure Account of Mumbai Club for
the year ending 31st March, 2024
Expenditure ₹ Income ₹
 To Groundsman’s fee 75,000 By Donations and 2,45,000
Subscription (W.N.2)

To Rent of Ground 25,000

To Club night’ 38,000 By Receipts from bar 20,000

Expenses room

Less: Contribution (10,000) 28,000*

To Printing & Office 28,000 By Proceeds of club night 78,000*

Expenses (W.N. 3)

To Repairs to 45,000 By Interest (5,000+2,000) 7,000

Equipment (W.N.4)

To Depreciation on 52,000
Machinery (W.N. 5)

To Honorarium to 60,000
Secretary

To Bonus to 20,000
Groundsman

To Excess of Income 17,000

over Expenditure

3,50,000 3,50,000

* Alternatively, the profits from club night can be shown as the net amount of ₹
50,000 (₹ 78,000 - ₹ 28,000) on the credit side of Income and Expenditure Account.

Balance Sheet of Mumbai Club as on 31st March,2024

Liabilities ₹ Assets ₹

Outstanding Expenses:

Groundsman Bonus 20,000 Cash in hand 25,000

Printing 8,000 Cash in Saving A/c 2,04,000

 Honorarium 60,000 Subscription Receivable 10,000
(40,000+20,000)

Bank Overdraft (25,000- 5,000 Interest Due 2,000

20,000)

Capital Fund: Opening 2,88,000 Machinery & 1,75,000

Equipment’s

Add: Surplus for the year 17,000

Add: Entrance Fees 18,000 3,23,000

4,16,000 4,16,000

Balance Sheet as on 1st April,2023

Liabilities ₹ Assets ₹

Outstanding Expenses Cash in hand 20,000

Printing 10,000Cash in Saving A/c 1,93,000

Honorarium to 40,000 Cash in Current A/c 30,000

Secretary Capital Fund
2,88,000
(Balancing Figure)

Subscription 15,000
Receivable

Machinery &
Equipment’s
80,000

3,38,000 3,38,000

Calculation of Donations and Subscriptions ₹

Donations and Subscriptions as per Receipt and Payments A/c 2,50,000

Add: Outstanding as on 31.03.21
10,000
Less: Outstanding as on 01.04.20
15,000

2,45,000

Printing and Office Expenses ₹

 Printing and Office Expenses as per Receipt and Payments A/c 30,000
Add: Outstanding as on 31.03.21
8,000
Less: Outstanding as on 01.04.20
10,000

28,000

Repairs to Equipment ₹

Repairs as per Receipt and Payments A/c Add: Outstanding as 50,000

on 31.03.21
25,000
Less: Outstanding as on 01.04.20
30,000

45,000

Depreciation on Machinery and equipment ₹

Balance as on 01.04.20 80,000

Add: Purchases during the year Less: Sale of Equipment 1,55,000

Less: Balance as on 31.03.21 8,000

1,75,000

52,000

5. a.

Corrected Trial Balance of Mr. X as on 31st March, 2024

Particulars Dr. Amount ₹ Cr. Amount ₹

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

Purchases returns 792

 Loan from Bank 768

Trade expenses 2,100

Trade Payable 1,584

Bills payable 300

Salaries and Wages 1,800

Cash at Bank 678

Inventory (1.4.2021) 792

Rent and rates 1,389

Sales return 294

16,362 16,362

Reasons:

1. Due from customers is an asset, so its balance will be a debit balance.

2. Purchases return account always shows a credit balance because assets goes
out.
3. Trade Payable is a liability, so its balance will be a credit balance.
4. Bills payable is a liability, so its balance will be a credit balance.
5. Inventory (opening) represents assets, so it will have a debit balance.
6. Sales return account always shows a debit balance because assets come in.

5. b.

Manufacturing A/c (for year ending 31.3.2024)

Particulars ₹ Particulars ₹
To Opening Stock By Closing Stock
Raw Material Raw Material 4,000
10,000
WIP 17,000 WIP 8,000 12,000
7,000
To Purchases By Trading A/c (b.f.) 73,600
(Cost of Finished goods)
Raw Material
60,000
Less: Return Outward 55,000
(5,000)
To Wages 4,500
To Gas & Fuel 1,000
To Factory Rent 500
 To Power 600
To Consumable stores 700
To Freight on Raw Material 1,800
85,600 85,600

Trading A/c
Particulars ₹ Particulars ₹
To Opening Stock 5,000 By Sales 1,18,000
(Finished Goods) 1,20,000
Less: Return Inwards
(2,000)
To Manufacturing A/c 73,600 By Closing Stock (Finished 8,000
Goods)
To Purchases
21,000
Less: Return Outward 18,500
(1,500)
To Freight on Finished Goods 600
To Gross Profit 28,300
1,26,000 1,26,000

5.c) Sr. No. Particulars Dr (`) Cr (`)

(i) Bank A/c Dr. 2,25,000

To Equity Share Capital A/c 1,50,000

To Securities Premium A/c 75,000

(Being 15,000 Equity Shares Issued at a premium of ` 5)

(ii) Securities Premium A/c Dr 75,000

Profit & Loss A/c Dr 75,000

To Bonus to Equity Shareholders A/c 1,50,000

(Being amount transferred for issue of Bonus

Shares to ESH in the ratio of 1:5)

(iii) Bonus to Equity Shareholders A/c Dr. 1,50,000

To Equity Share Capital A/c 1,50,000

(Being bonus shares issued)

 (iv) 12% Debentures A/c Dr 3,60,000

Premium on Redemption A/c Dr 10,800

To Debenture Holders A/c 3,70,800

(Being amount payable to debenture holders)

(v) Profit & Loss A/c Dr 10,800

To Premium on Redemption A/c 10,800

(Being premium on redemption transferred to P&L)

(vi) Debenture Redemption Reserve A/c Dr 36,000

To General Reserve 36,000

(Being DRR transferred to General Reserve)

(vii) Bank A/c Dr 54,000

To DRR Investment A/c 54,000

(Being DRR Investment sold)

(viii) Debenture Holders A/c 3,70,800

To Bank A/c 3,70,800

(Being Debenture Holders paid)

6. a.

Entry Particulars L.F. Debit Credit

No. Amount Amount
(₹) (₹)
1 Bank A/c Dr. 40,000
40,000
To Equity Share Application A/c

(Money received on applications for 20,000

shares @ ₹ 2 per share)
2 Equity Share Application A/c Dr. 40,000

To Equity Share Capital A/c 40,000

(Transfer of application money on 20,000 shares

to share capital)
3 Equity Share Allotment A/c Dr. 80,000
 To Equity Share Capital A/c 60,000
To Securities Premium A/c 20,000

(Amount due on the allotment of 20,000 shares

@ ₹ 3 per share and Securities Premium @ ₹1
per share)
4 Bank A/c Dr. 80,000

To Equity Share Allotment A/c 80,000

(Allotment money received)

5 Equity Share First Call A/c Dr. 40,000

To Equity Share Capital A/c 40,000

(Being first call made due on 20,000 shares at

₹ 2 per share)
6 Bank A/c Dr. 46,000

To Equity Share First Call A/c 40,000

To Calls in Advance A/c 6,000

(Being first call money received along with calls

in advance on 2,000 shares at ₹ 3 per share)
7 Equity Share Final Call A/c Dr. 60,000

To Equity Share Capital A/c 60,000

(Being final call made due on 20,000 shares at

₹ 3 each)
8 Bank A/c Dr. 53,100

Calls in Advance A/c Dr. 6,000

Calls in Arrears A/c Dr. 900

To Equity Share Final Call A/c 60,000

(Being final call received for 17,700 shares, calls

in advance for 2,000 shares and calls in arrears
on 300 shares adjusted)
9 Interest on Calls in Advance A/c Dr. 240

To Shareholders A/c 240

(Being interest made due on calls in adv

₹6,000 at the rate of 12% p.a.)
10 Shareholders A/c Dr. 240
To Bank A/c 240
 (Being payment of interest
made to shareholder)
11 Shareholders A/c Dr. 15
To Interest on Calls in Arrears A/c 15
(Being interest on calls in arrears made due at
the rate of 10%)
12 Bank A/c Dr. 615
To Calls in Arrears A/c 600
To Shareholders A/c 15
(Being money received from shareholder having
200 shares for calls in arrears and interest
thereupon)
13 Shareholders A/c Dr. 10
To Interest on Calls in Arrears A/c 10
(Being interest on calls in arrears made due at
the rate of 10%)
14 Bank A/c Dr. 310
To Calls in Arrears A/c 300
To Shareholders A/c 10
(Being money received from shareholder having
100 share for calls in arrears and interest
thereupon)

Calculation of Interest on Calls in Advance & Calls in Arrears:

Interest on Calls in Advance = ₹ 6,000 x 12% x 4 / 12 = ₹ 240
Interest on Calls in Arrears ₹ 600 x 10% x 3 / 12 = ₹ 15
Interest on Calls in Arrears ₹ 300 x 10% x 4 / 12 = ₹ 10
Table F of The Companies Act,2013 prescribes 10% and 12% p.a. as the maximum
rates respectively for calls in arrears and calls in advance. Accordingly these rates
have been considered while passing the above entries,
Note: For entry no 9&10, 11&12,13&14 combined entry can also be passed.
6. b.

Inclusions
(a) Cost of employee benefits

(b) Cost of site preparation Exclusions,

(c) Initial delivery and handling cost

(d) Installation and assembly

(e) Cost of testing

(f) Professional fee

Exclusions
(a) Cost of opening new facility · (ex. inauguration cost)

(b) Cost of introducing new product (ex. sates promotion)

(c) Cost of conducting business costs in a new location

(d) Administrative and general costs overhead costs.