Mock Test Paper - Series I: March, 2025

Date of Paper: 8 th March, 2025

Time of Paper: 10 P.M. to 1 P.M.
INTERMEDIATE COURSE: GROUP – I
PAPER – 1 : ADVANCED ACCOUNTING
ANSWERS
1. (i) (b)
(ii) (a)
(iii) (d)
(iv) (a)
2. (i) (b)
(ii) (c)
(iii) (b)
(iv) (d)
3. (i) (c)
(ii) (b)
(iii) (c)
(iv) (d)
4. (c)
5. (b)
6. (a)
PART II – Descriptive Questions (70 Marks)
1. (a) In the books of Mr. Zoom
for the year ending on 31.3.2025
(Scrip: Equity Shares of P Limited)
Date Particulars Qty Amount Date Particulars Qty Amount
1.4.2024 To Balance b/d 1000 1,20,000 8.04.2024 By Bank A/c 3,400
(W.N.1)
5.04.2024 To Bank (200x 200 27,000 10.10.2024 By Bank A/c 350 49,000
`135) (350x `140)

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 10.10.2024 To Profit & 7,117 31.3.2025 By Balance c/d 850 1,01,717
Loss A/c (W.N.3)
(W.N.2)
1200 1,54,117 1200 1,54,117

Working Notes:
1. Sale of Rights ` 4,000
The market price of all shares of P Ltd after shares becoming ex-rights has
been reduced by ` 3,400
In this case out of sale proceeds of `4,000; ` 3,400 may be applied to
reduce the carrying amount to the market value and ` 600 would be
credited to the profit and loss account.
2. Profit on sale of 350 shares
Amount
`
Sale price of 350 shares (350 shares X 140 each) 49,000
Less: Cost of 350 shares [(1,20,000+27,000-3,400) 41,883
X350]/1200
Profit 7,117

3. Valuation of 850 shares as on 31.03.2025

Particulars Amount
Cost price of 850 shares ` 1,01,717
[(1,20,000 +27,000 -3,400) x 850 /1,200]
Fair Value as on 31.03.2020 [850 X ` 125 each] ` 1,06,250
Cost price or fair value whichever is less ` 1,01,717
(b) Cash flow statement
Particulars ` `
Cash Flow from Operating Activities
Net profit before tax 60,00,000
Adjustment
Depreciation on PPE 14,00,000
Discount on issue of debenture 90,000
Profit on sale of investment (50,000)

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 Interest income (1,40,000)
Interest expense 8,70,000
Stock adjustment 3,28,000
Operating profit before WC changes 84,98,000
Adjustment
Increase in inventory (5,80,000)
Decrease in trade receivable 27,600
Increase in trade payable 5,200
Increase in o/s exp 8,800
Cash generated from operation 79,59,600
Less:Income tax (25,60,000)
Net Cash Flow from Operating Activities 53,99,600
Cash flow from investing Activities
Sale of investment 7,50,000
Interest received 1,40,000
Payment for Purchase of fixed asset (2,00,000) 6,90,000

2. Consolidated Balance Sheet of P Ltd.

and its Subsidiary Q ltd. as on 31.3.2024

Sr. No. Particulars Note No. `

I. Equities & Liabilities
(1) Shareholder’s funds
(a) Share Capital 1 16,00,000
(b) Reserve & surplus 2 2,39,600
(c) Minority interest 55,600
(2) Current liability
(a) Other current liabilities (30,00,000+19,20,000) 49,20,000
Total 68,15,200
II. Assets
(1) (a) PPE (10,00,000 + 3,80,000 + 80,000 – 4,000) 14,56,000
(b) Goodwill 99,200

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 (2) Current Assets
(a) Other current assets (32,40,000 + 20,20,000) 52,60,000
Total 68,15,200

Notes to accounts:
Particulars `
(1) Share capital
Authorized share capital -
Issued, subscribed & paid-up capital
16,000 equity shares of `100 each 16,00,000

(2) Reserve & Surplus

Profit & Loss A/c (W.N. 5) 2,39,600

Working Notes:
1. Shareholding
Held by P Ltd. Minority interest
3,600 shares (90%) 400 shares (10%)

2. Analysis of profit
Profit & Loss A/c
Particulars ` Particulars `
To Bal. c/d 80,000 By Bal. b/d 32,000
By Profit 48,000
80,000 80,000
Particulars Capital profit Revenue profit
Opening balance in P&L A/c 32,000
Profit during the year 48,000
Revaluation of equipment (W.N.6) 80,000
Short depreciation on equipment (4,000)
Total 1,12,000 44,000
Q Ltd. (Minority) (10%) 11,200 4,400
P Ltd. (90%) 1,00,800 39,600

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3. Cost of Control
Particulars Computation `
Cost of investment As per balance 5,60,000
sheet
Less: Dividend out of pre-acquisition profit -
(A) 5,60,000
Share in net assets of Q ltd.
Share capital 4,00,000 × 90% 3,60,000
Capital profit W.N. 2 1,00,800
(B) 4,60,800
Goodwill A–B 99,200
4. Calculation of Minority Interest
Particulars Computation `
Share capital 4,00,000 × 10% 40,000
Capital profit WN 2 11,200
Revenue profit WN 2 4,400
Total i + ii + iii 55,600

5. P Ltd.
Particulars General Profit & Loss A/c
Reserve
Balance As Per Balance sheet - 2,00,000
Share in profit of Q ltd. - 39,600
Total - 2,39,600

6. Appreciation / Depreciation on revalued asset

Particulars `
Book value as on 31.3.24 (as per b/s) 3,80,000
Book value as on 1.4.23 (Given) 4,00,000
Depreciation (iii) 20,000
Depreciation rate (iii/ii×100%) 5%
Revaluation of asset (ii + 20%) 4,80,000
Revaluation reserve 80,000
Depreciation on revalued asset 24,000

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 (4,80,000 × 5%)
Short depreciation 4,000

3. (a) Trading and Profit & Loss Account of the Branch

for the year ended 31st March, 2024
` in ` in
lacs lacs
To Opening Stock 120 By Sales 720
To Goods received from By Closing Stock 124
Head Office 576
Less: Returns (10) 566
To Carriage Inwards 14
To Gross Profit c/d 144
844 844
To Salaries 50 By Gross Profit b/d 144
To Depreciation on Furniture 4
To Rent 20
To Advertising 12
To Telephone, Postage & Stationery 6
To Sundry Office Expenses 2
To Head Office Expenses 2
To Net Profit Transferred to
Head Office A/c 48
144 144
Balance Sheet as on 31st March, 2024
Liabilities ` in lacs Assets ` in lacs
Head Office 160 Furniture & Equipment 40
Add: Goods in transit 20 Less: Depreciation (4) 36
Head Office Expenses 2 Stock in hand 124
Net Profit 48 230 Goods in Transit 20
Outstanding Expenses 6 Debtors 40
Cash at bank and in hand 16
236 236

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 (b) Net assets of B Ltd. as on 31st March, 2024
` in ` in
lakhs lakhs
Property, plant and equipment 360
Investments 90
Current Assets 140
Loans and Advances 30
Total Assets 620
Less: 15% Debentures 180.0
Current Liabilities 100.0 (280)
Equity / Net Worth 340
Share of Minority Interest in net assets (30% of 340) 102
A Ltd.’s share in net assets (70% of 340) 238
A Ltd.’s cost of acquisition of shares of B Ltd.
(`140 lakhs) (140)
Capital reserve 98

4. Balance Sheet of Amol Ltd. as at 31st March, 2024

Particulars Note No `
I. EQUITY AND LIABILITIES
(1) Shareholders' Funds
(a) Share capital 1 5,00,000
(b) Reserves and Surplus 2 12,38,231
(2) Non-current Liabilities
(a) Long-term borrowings 3 42,50,000
(3) Current Liabilities
(a) Short term borrowings (Installment of term loan 8,50,000
falling due in one year)
(b) Trade Payables 4 28,16,937
(c) Other current liabilities 5 88,250
(d) Short term provisions (provision for tax) 58,494
Total 98,01,912

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II. ASSETS
(1) Non-current assets
(a) PPE 6 55,85,350
(2) Current assets
(a) Inventories 5,68,750
(b) Trade receivables 7 30,75,625
(c) Cash and bank balances 8 5,53,437
(d) Short term loans & advances (Advance tax paid) 18,750
Total 98,01,912
Statement of Profit & Loss of Amol Ltd.
For the year ended 31st March, 2024
Particulars Notes Amount
Revenue from operations 62,93,500
Other income (Commission income) 36,250
Total Income (i ) 63,29,750
Expenses:
Purchases of Inventory-in-Trade 41,47,500
Changes in inventories of finished goods work-in- progress 9 (1,06,250)
and Inventory-in-Trade
Employee benefits expense 10 7,14,250
Finance costs (interest on term loan) 4,02,500
Depreciation 3,90,150
Other operating expenses 11 5,47,625
Total expenses(ii) 60,95,775
Profit (Loss) for the period (i – ii) 2,33,975
Less:Tax (25%) (58,494)
PAT 1,75,481

Notes to accounts:
Particulars ` `
1. Share Capital
Equity share capital Authorized
1,00,000 equity shares of ` 10 each 10,00,000

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 Issued & subscribed
50,000 equity shares of ` 10 each 5,00,000
2. Reserves and Surplus
General Reserve 5,00,000
Add: Current year transfer 50,000 5,50,000
Profit & Loss balance
Opening balance 4,37,750
Add:Profit for the year 1,75,481
Less:Transfer to General reserve (50,000) 5,63,231
Securities premium 1,25,000
Total 12,38,231
3. Long-term borrowings
Term loan from public sector bank 51,00,000
(Secured by hypothecation)
Less: Installment of Term loan falling due within (8,50,000)
1 year
Total 42,50,000
4. Trade payables
Trade payables 27,54,437
Bills payable 62,500
Total 28,16,937
5. Other current liabilities
Rent outstanding 10,000
Wages and Salaries Outstanding 78,250 88,250
6. PPE (W.N2)
Land 12,00,000
Factory Buildings 16,60,600
Plant & Machinery 23,90,625
Furniture & Fittings 3,34,125
Total 55,85,350
7. Trade receivables
Debtors Outstanding for period exceeding 6 42,800
months

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 Other debts 31,94,700
Less: Provision for doubtful debt (1,61,875) 30,75,625
8. Cash and bank balance
Bank balance 4,87,500
Cash on hand 65,937 5,53,437
9. Changes in Inventories
Opening Inventory 4,62,500
Less: Closing Inventory (5,68,750) (1,06,250)
10. Employee benefit expense
Wages and Salaries 6,36,000
Add: Wages and Salaries Outstanding 78,250 7,14,250
11. Other operating expenses
Rent 1,10,000
Add: outstanding 10,000 1,20,000
Rates and Taxes 25,000
Selling & Distribution expenses 2,18,000
Bad debts 19,250
Provision for Doubtful Debts (1,61,875- 12,500) 1,49,375
Director's fee 16,000
Total 5,47,625

Note :
(1) 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 the financial
statements) as per Accounting Standards.
(2) Calculation of Depreciation
Particulars Book Accumulated WDV Current year Current year
value depreciation Depreciation WDV
Land 12,00,000 12,00,000 - 12,00,000
Factory building 18,40,000 92,000 17,48,000 87,400 16,60,600
Plant & 31,25,000 4,68,750 26,56,250 2,65,625 23,90,625
Machinery
Furniture Fittings 4,12,500 41,250 3,71,250 37,125 3,34,125
Total 3,90,150 55,85,350

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5. Balance Sheet of Heer Ltd. as at 1st April 2024
(` in lakhs)
Particulars Notes Amount
I. Equity and Liabilities:
(1) Shareholder's Funds:
(a) Share Capital 1 4,500
(b) Reserves and Surplus 2 8,400
(2) Non-current Liabilities:
(a) Long Term Borrowing 3 168.75
(3) Current Liabilities:
(a) Trade Payable 4 1,830
Total 14,898.75
II. Assets:
(1) Non-current assets:
(a) PPE 5 4,650
(b) Intangible 6 1,266.75
(c) Non-current Investment 7 600
(2) Current Assets:
(a) Inventories 8 1,800
(b) Trade receivables 9 1,950
(c) Cash and cash equivalent 10 4,632
Total 14,898.75

Notes to Accounts:
Particulars (`) lacs (`) lacs
1. Share Capital
Authorized Share Capital
a) Equity Share Capital
300 Lakhs equity shares of ` 10 each 3,000
b) Preference Share Capital
15 Lakhs Preference shares of ` 100 1,500
2,250

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 Issued, Subscribed & Paid up Capital
a) Equity Share Capital
300 Lakhs equity shares of ` 10 each 3,000
(out of above 210 lakhs of equity shares are
issued for consideration other than cash)
b) Preference Share Capital
15 Lakhs Preference shares of ` 100 1,500
(all share are issued for consideration other
than cash)
4,500
2. Reserves and surplus
Investments allowances reserves (450 + 300) 750
Securities premium (300 × 25) + (15 × 60) 8,400
Less: Amalgamation adjustment reserve (750)
Total 8,400
3. Long-term borrowings
16% Debentures 1,68.75

4. Trade payables
Meet Ltd. 1,260
Preet Ltd. 570 1,830
5. PPE
Land and Building 2,700
Plant and Machinery 1,950 4,650
6. Intangible assets
Goodwill [W.N. 2] 1248.75
Add: Liquidation exp. (12 + 6) 18 1,266.75
7. Non-current Investments
Investments (450 + 150) 600
8. Inventories
Meet Ltd. 1,050
Preet Ltd. 750 1,800

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 9. Trade receivables
Meet Ltd. 900
Preet Ltd. 1,050 1,950
10. Cash & cash equivalents
Meet Ltd. 900
Preet Ltd. 600
Liquidation Expenses (12 + 6) (18)
Share issued for cash (90 lakh shares × `35) 3,150 4,632

Working Notes:
1. Calculation of Purchase Consideration:
Particulars (` in lakhs)
Meet Ltd. Preet Ltd.
A. Preference Shareholders:
�
9,00,00,000
� × ` 160 1440
100

�
6,00,00,000
� × ` 160 960
100
B. Equity Shareholders:
�
24,00,00,000 × 5
� × ` 35 each 4,200
100

�
22,50,00,000 × 4
� × ` 35 each 3,150
100
C. Purchase Consideration (A + B) 5,640 4,110

2. Net Assets
Particulars Meet Ltd (`) Preet Ltd (`)
Assets taken over:
Property Plant & Equity 2,700 1,950
Non-Current Investments 450 150
Inventory 1,050 750
Trade receivables 900 1,050
Cash and bank 900 600
6,000 4,500

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 B Liabilities taken over:
10% Debentures 112.50 56.25
Trade payables 1,260 570
1,372.5 626.25
C Net assets taken over 4,627.5 3,873.75
D Purchase consideration (W.N .1) 5.64 4110
E Goodwill 1,012.5 236.25

3. Issue of Debentures
Debentures ` 1,80,00,000 ` 90,00,000
Interest 10% ` 18,00,000 ` 9,00,000
18,00,000 × 100 9,00,000 × 100
� 16
� = 1,12,50,000 � 16
� = 56,25,000

6. (a) (i) Qualitative Characteristics of Financial Statements:

Understandability, Relevance, Comparability, Reliability & Faithful
Representation
Elements of Financial Statements:
Asset, Liability, Equity, Income/Gain and Expense/Loss
(ii)
Particulars Financial Capital Maintenance at
Historical Cost (`)
Closing equity
36,00,000 represented by cash
(` 30 x 1,20,000 units)
Opening equity 1,20,000 units x ` 20 = 24,00,000
Permissible drawings to keep 12,00,000 (36,00,000 – 24,00,000)
Capital intact
Or
Capitalization of borrowing costs should cease when substantially all the activities
necessary to prepare the qualifying asset for its intended use or sale are complete.
An asset is normally ready for its intended use or sale when its physical
construction or production is complete even though routine administrative work
might still continue. If minor modifications such as the decoration of a property to
the user’s specification, are all that are outstanding, this indicates that
substantially all the activities are complete. When the construction of a qualifying

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 asset is completed in parts and a completed part is capable of being used while
construction continues for the other parts, capitalization of borrowing costs in
relation to a part should cease when substantially all the activities necessary to
prepare that part for its intended use or sale are complete.
(b) (i) Share capital - Non-monetary; Trade Payables - Monetary
Cash balance – Monetary; Property, plant and equipment - Non-monetary
(ii) Amount of Exchange difference and its Accounting Treatment
Foreign `
Currency Rate
Trade payables
Initial recognition US $ 12,500 1 US $ = ` 80 10,00,000
(` 10,00,000/80)
Rate on Balance sheet date 1 US $ = ` 85
Exchange Difference loss US $ 12,500 62,500
x ` (85-80)
Treatment:
Debit Profit and Loss A/c by ` 62,500
and Credit Trade Payables

Thus, Exchange Difference on trade payables amounting ` 62,500 is required

to be transferred to Profit and Loss.
(c) The following dates should be considered for consideration of weights for the
purpose of calculation of weighted average number of shares in the given
situations:
(i) Date of Cash receivable
(ii) Date of conversion
(iii) Date on which settlement becomes effective
(iv) When the services are rendered
(v) Date when interest ceases to accrue
(vi) Date on which the acquisition is recognised.

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