CA Shrinivas Kulkarni +91 99758 44336

SUGGESTED ANSWER
SUBJECT - ADVANCE ACCOUNTS

PAPER NAME - ADV ACC 50%

TEST 2

PAPER CODE - AAD2

DURATION - 2 HOURS

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Adv Acc 50% Test 2 Answerkey

PART I – Multiple Choice Questions

Case Study 1
1. C
2. A
3. B
4. D
Individual MCQ
5. B
6. A
7. C
8. B

Case Study 1 Solution

Trade Receivables:
 Sale recorded: Rs. 7,00,000
 Exchange rate at the time of sale: US$ 1 = Rs. 79.4
 Exchange rate on 31st March 2024: US$ 1 = Rs. 83.3
Calculation:
 USD Amount = 7,00,000÷79.47 = 8,818.34 USD
 Value on 31st March 2024 = 8,818.34×83.38 = Rs. 7,34,383 approx
 Reporting Difference = 7,34,383 - 7,00,000 = Rs. 34,383 Gain
Correct answers:
 Q1: (C) Rs. 7,34,383 approx
 Q2: (A) Gain of Rs. 34,383 approx
Loan:
 Loan recorded: Rs. 10,00,000
 Exchange rate at the time of loan: US$ 1 = Rs. 81.1

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 Exchange rate on 31st March 2024: US$ 1 = Rs. 83.3

Calculation:
 USD Amount = 10,00,000÷81.1 = 12,334.53 USD
 Value on 31st March 2024 = 12,334.53×83.312 = Rs. 10,27,127 approx
 Reporting Difference = 10,27,127 - 10,00,000 = Rs. 27,127 Loss
Correct answers:
 Q3: (B) Rs. 10,27,127 approx
 Q4: (D) Loss of Rs. 27,127 approx

Q.1
Consolidated Profit & Loss Account of Hello Ltd. and its subsidiary Sun Ltd. for the
year ended on 31st March, 2017
Particulars Note Rs. in Lacs
No.
I. Revenue from operations 1 11,730
II. Total revenue 11,730
III. Expenses
Cost of Material purchased/Consumed 3 2,360

Changes of Inventories of finished goods 2 (2,392)

Employee benefit expense 4 1,900
Finance cost 6 300
Depreciation and amortization expense 7 300
Other expenses 5 1,070
Total expenses 3,538
IV. Profit before Tax(II-III) 8,192
V. Tax Expenses 8 2,800
VI. Profit After Tax 5,392
Profit transferred to Consolidated Balance
Sheet
Profit After Tax 5,392
Dividend paid

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Hello Ltd. 2,400

Sun Ltd. 300
2,700
Less: Share of Hello Ltd. in dividend of Sun Ltd.
80% of Rs. 300 lacs (240) (2,460)
Profit to be transferred to consolidated 2,932
balance sheet

Notes to Accounts

Rs. in Lacs Rs. in Lacs

1. Revenue from Operations
Sales and other income
Hello Ltd. 10,000
Sun Ltd. 2,000
12,000
Less: Inter-company Sales (240)
Consultancy fees received by Hello Ltd. from (10)
Sun Ltd.
Commission received by Sun Ltd. from Hello (20) 11,730
Ltd.
2. Increase in Inventory
Hello Ltd. 2,000
Sun Ltd. 400
2,400

Less: Unrealized profits Rs. 48 lacs ×20/120

(8) 2,392
14,122
3. Cost of Material purchased/consumed
Hello Ltd. 1,600
Sun Ltd. 400
2,000
Less: Purchases by Sun Ltd. from Hello Ltd. (240) 1,760
Direc Expenses
t
Hello Ltd. 400
Sun Ltd. 200 600
2,360
4. Employee benefits and expenses
Wages and Salaries:
Hello Ltd. 1,600

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Sun Ltd. 300 1,900

5. Other Expenses
Administrative Expenses

Hello Ltd. 400

Sun Ltd. 200
600
Less: Consultancy fees received by Hello Ltd. (10) 590
from Sun
Ltd.
Selling and Distribution Expenses:
Hello Ltd. 400
Sun Ltd. 100
500
Less: Commission received from Sun Ltd. from (20) 480
Hello Ltd.
1,070
6. Finance Cost
Interest:
Hello Ltd. 200
Sun Ltd. 100 300
7. Depreciation and Amortization
Depreciation:
Hello Ltd. 200
Sun Ltd. 100 300
8. Provision for tax
Hello Ltd. 2,400
Sun Ltd. 400 2,800

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Q.2
a
Gain from curtailment is estimated as under:

Rs.
Reduction in gross obligation 600
Less: Proportion of unamortised past (18)
service cost
Gain from curtailment 582
The liability to be recognised after curtailment in the balance sheet is
estimated as under:
Rs.
Reduced gross obligation (90% of Rs. 6,000) 5,400
Less: Fair value of plan assets (5,100)
300
Less: Unamortised past service cost (90% of Rs. (162)
180)
Liability to be recognised in the balance sheet 138

b. (i) AS 29 “Provisions, Contingent Liabilities and Contingent Assets” provides that

when an enterprise has a present obligation, as a result of past events, that
probably requires an outflow of resources and a reliable estimate can be made of
the amount of obligation, a provision should be recognized. Sun Ltd. has the
obligation to deliver the goods within the scheduled time as per the contract. It is
probable that Sun Ltd. will fail to deliver the goods within the schedule and it is
also possible to estimate the amount of compensation. Therefore, Sun Ltd.
should provide for the contingency amounting Rs. 1.5 crores as per AS 29.
(ii) Provision should not be measured as the excess of compensation to be paid over
the profit. The goods were not manufactured before 31st March, 2016 and no
profit had accrued for the financial year 2015- 2016. Therefore, provision should
be made for the full amount of compensation amounting Rs. 1.50 crores.

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Q.3
In the books of Head Office – Kolkata Branch Account (at invoice)
Rs. Rs.
To Balance b/d By Stock reserve (opening) 6,000
Stock 30,000 By Remittances:
Debtors 18,000 Cash Sales 1,00,000
Furniture 3,000 Cash from Debtors 60,000
To Goods sent to 1,60,000 Less: Petty expenses (600) 1,59,400

branch By Goods sent to branch (loading) 32,000

To Goods returned by 400 By Goods returned by branch 2,000
branch (loading) (Return to H.O.)
To Bank (expenses By Balance c/d
paid by H.O.) Stock 28,000
Rent 1,800 Debtors 16,880
Salary 3,200 Furniture (3,000−300) 2,700
Stationary &
printing 800 5,800
To Stock reserve (closing) 5,600
To Profit transferred to
General Profit & Loss A/c 24,180
2,46,980 2,46,980

Working Note:
Debtors A/c
Rs. Rs.
To Balance c/d 18,000 By Cash account 60,000
To Sales account (credit) 60,000 By Sales return account 960
By Discount allowed 160
account
By Balance c/d 16,880
78,000 78,000

Note: In the absence of opening cash balance, remittance to Head Office has been
made after payment of petty expenses.

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Q.4
a. Journal Entries in the Books of ABC Ltd.

Date Particulars ₹ (Dr.) ₹ (Cr.)

Jan. 01, 2021 Bank Account (5,00,000 x Dr 342,50,000
68.50) .
To Foreign Loan Account 342,50,000
March 31, Foreign Exchange Difference Dr 5,00,000
2021 Account .
To Foreign Loan Account 5,00,000
[5,00,000 x (69.50−68.50)]
Jul. 31, 2021 Foreign Exchange Difference 2,50,000
Account [5,00,000 x (70−69.5)] Dr
.
Foreign Loan Account Dr 347,50,000
.
To Bank Account 350,00,000

b.
Tax as per accounting profit 15,00,000X20%= ₹ 3,00,000

Tax as per Income−tax Profit 2,50,000X20% =₹ 50,000

Tax as per MAT 7,50,000X7.50%= ₹ 56,250

Tax expense= Current Tax +Deferred Tax

₹ 3,00,000 = ₹ 50,000+ Deferred tax

Therefore, Deferred Tax liability as on 31−03−2020

= ₹ 3,00,000 – ₹ 50,000 = ₹ 2,50,000

Amount of tax to be debited in Profit and Loss account for the

year 31−03−2020 Current Tax + Deferred Tax liability + Excess
of MAT over current tax

= ₹ 50,000 + ₹ 2,50,000 + ₹ 6,250 (56,250 – 50,000)= ₹ 3,06,250

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Q.5
Statement of Profit and Loss of Travese Limited. for the year ended 31st March, 2023

Particulars Notes Amount

I. Revenue from operations 1 47,22,600

II. Other income Total 2 1,61,465

III. Income (I + II)
IV. Expenses: 48,84,065

Purchases of Inventory−in−Trade 28,86,600

Changes in inventories of finished goods, 3 20,400

work−in progress and Inventory−in−Trade
Finance costs 4 3,52,410

Depreciation and amortization expenses 5 3,57,765

Other expenses 6 6,65,040

Total expenses 42,82,215

Profit (Loss) for the period (III − IV) before tax
V.
6,01,850
VI Provision for tax Profit for the period (1,50,463)
VII
4,51,387

Notes to accounts

1 Revenue from
47,22,600
operations
Sale
2 Other Income
Transfer fees 38,250

Discount received 66,300

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Interest on Investment 55,000

Profit on sale of plant 1,915

Total
1,61,465
3 Changes in inventories of
finished goods,
work−InProgress and 4,97,250
Inventory−in−Trade
Opening Inventory
Less: Closing Inventory (4,76,850) 20,400
Total
20,400
4 Finance costs
Interest on Debentures 3,39,150

Bank Interest 13,260

Total 3,52,410

5 Depreciation and Amortization

3,57,765
expenses, Depreciation on Plant &
Machinery
(10% x 37,43,400 − 1,65,750)
6 Other expenses 2,58,060

Factory expense

Rent, Taxes and Insurance 65,025

Repairs 1,49,685

Sundry expenses 1,27,500

Selling expenses 26,520

Directors fees 38,250

Total 6,65,040

Note:
The final dividend will not be recognized as a liability at the balance sheet date (even
if it is declared after reporting date but before approval of financial statements) as

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per accounting standards. Hence, it is not recognized in the financial statement for
the year ending 31st March 2023. Such dividend will be disclosed in notes only.

CApariksha Test Series and Mentorship Program