ICAI Foundation - Accounting (2025)

State with reasons, whether the following statement is True or False: The materiality depends only upon the amount of the item and not upon the size of the business, nature and level of information, level of the person making the decision etc.

State with reasons, whether the following statement is True or False: While preparing the Income and Expenditure Account as per accrual concept, the income and expenditure is considered in the period in which actual receipts or actual payments are made.

State with reasons, whether the following statement is True or False: Profit sharing ratio and capital contribution ratio need not be same.

State with reasons, whether the following statement is True or False: Depreciation is not provided in the financial year when the entity incurs loss.

State with reasons, whether the following statement is True or False: The concept that helps in keeping business affairs free from the influence of the personal affairs of the owner is known as the matching concept.

State with reasons, whether the following statement is True or False: A Company cannot issue equity shares at discount to general public.

Explain the generally accepted valuation principles.

Record the following transactions in the purchase book: 2nd December 2024: Purchased from Gupta & Co. on credit – 100 plates @ ₹150 per plate, 500 small bowls @ ₹50 per bowl, Less: Trade discount @ 10%, Packing charges @ ₹2 per plate and ₹1 per bowl. 6th December 2024: Purchased a furniture for shop from M/s Plywood Co. on credit for ₹15,000/-. 8th December 2024: Purchased on Credit from M/s Ajanta & Co. – 50 boxes of spoon @ ₹200 per box, 40 boxes of Fork @ ₹250 per box, Less: Trade Discount @ 8%. 15th December 2024: Purchased for cash from Steel House – 40 big bowl @ ₹70/- per bowl. 27th December 2024: Purchased one dozen cookers @ ₹750 each from M/s Verma & Sons on credit.

The following are the details of machineries held by a firm: M1 – Purchased 01/04/2020, Purchase Value ₹11,00,000, Useful Life 8 years, Scrap Value ₹20,000; M2 – Purchased 01/04/2022, Purchase Value ₹9,40,000, Useful Life 8 years, Scrap Value ₹40,000; M3 – Purchased 01/04/2024, Purchase Value ₹8,10,000, Useful Life 5 years, Scrap Value Nil. The firm uses 'sum of years digits' method for charging depreciation and maintains a separate account for it. On 1st April 2024, the M1 machine has become obsolete and has been sold for ₹1,34,000/-. On the same date the estimated useful remaining life of M2 machine is reassessed at 3 years with ₹10,000 as scrap value. Prepare the Machinery Account, Provision for Depreciation Account and Machinery Disposal Account for the year ending 31st March, 2024 and 31st March, 2025.

Pass the Journal entries to record/rectify the following transactions in the books of Mr. Dutt. Suspense account may be used, if required: (i) Sale of goods to Mahesh at the list price of ₹1,80,000/- less 10% trade discount. Out of the amount due 50% is received, out of which two-third is received by cheque and the balance amount is received in cash. CGST and SGST applicable is 6% each. (ii) One of the debtors, Mr. X has agreed to pay his dues of ₹3,000/- to Mr. C who is a creditor of Mr. Dutt with the same amount being due to him. (iii) Employees have been given inventory having selling price of ₹1,00,000 (Cost price ₹75,000) on the eve of Deepawali as a gift. CGST and SGST applicable is 6% each. (iv) Sale of ₹2,500/- made to Mr. Kamal Kumar has been debited to Mrs. Kamla Rani. (v) A second hand machinery was purchased and its overhauling charges paid are ₹15,000/-. The accountant debited the overhaul charges to Repairs and Maintenance Account. Depreciation on machinery has been charged at 10%. (vi) A purchase of ₹151 from Mr. X was entered in Purchase Day Book as ₹15 and posted to Mr. X account as ₹51. (vii) R has been issued a credit note allowing rebate of ₹6,000/- as goods supplied to him was found defective. CGST and SGST charged @ 6% each. (viii) S was also given a credit note of ₹2,000/- for making prompt payment for outstanding against goods sold to him. CGST and SGST charged on sale was @ 6%. (ix) An accrual of telephone charges for ₹2,538 has been completely omitted. (x) A cheque of ₹25,390 issued to Mr. C. Dass (shown under trade payables) towards his dues has been wrongly debited to the purchases.

From the following particulars furnished by Mr. Wye, prepare his Trading and Profit & Loss Account for the year ended on 31st March, 2025. Also prepare his Balance Sheet as on 31st March, 2025. Opening balances (01.04.2024): Creditors ₹6,30,800; Expenses Outstanding ₹24,000; Fixed Assets ₹4,64,400; Stock in hand ₹3,21,600; Cash in hand ₹1,18,400; Cash at bank ₹1,60,000; Sundry Debtors ₹6,61,200. Closing balances (31.03.2025): Creditors ₹4,96,000; Expenses Outstanding ₹13,200; Fixed Assets ₹4,81,600; Stock in hand ₹4,44,800; Cash in hand ₹48,000; Cash at bank ₹2,75,200; Sundry Debtors = ?. Transactions: Cash and discount credited to debtors ₹25,60,000; Returns from debtors ₹58,000; Bad debts ₹16,800; Gross Sales (cash+credit) ₹28,72,400; Discount allowed by creditors ₹28,000; Returns to creditors ₹16,000; Capital introduced by cheque ₹3,40,000; Collection from debtors deposited into bank after receiving cash ₹25,00,000; Cash purchases ₹41,200; Expenses paid by cash ₹3,82,800; Drawings by cheque ₹17,200; Machinery acquired by cheque ₹1,27,200; Cash deposited into bank ₹2,00,000; Cash withdrawn from bank ₹3,69,600; Cash sales ₹1,84,000; Payment to creditors by cheque ₹24,10,800. Note: No Fixed Asset has been sold during the year.

Mr. P was carrying on a business. On 1st April, 2023, he admitted Q as a partner giving him one-fourth profit. Goodwill of the firm was ₹24,000. On 1st July, 2023, R was admitted as a partner and goodwill of the firm was determined at ₹40,000 and the new profit sharing ratio of P, Q and R will be 3:1:1. On 1st September, 2023, S was also admitted as a partner and goodwill was valued at ₹72,000/- and they agreed to share profits in the ratio of 3:1:1:1. On 1st April, 2024, R decided to retire and T was admitted as a partner. Goodwill was agreed at ₹96,000 and the profit sharing ratio amongst P, Q, S and T now agreed to be 5:4:3:4. All these agreements about goodwill have not been taken into account. On 1st April, 2024, when R retires and T is admitted, the partners decided to account for the goodwill by making necessary entries in respect of goodwill in the books without keeping the goodwill account in books. You are required to show working of the goodwill and to pass the required journal entry.

P and Q have been carrying on the business in the name of Bharat Springs in partnership sharing profit and losses in the ratio of 2:3. Their Balance Sheet as on 31st March, 2024: Liabilities – Capital P ₹80,000, Capital Q ₹1,60,000, General Reserve ₹50,000, Creditors ₹57,800, Bills Payable ₹16,500; Assets – Building ₹85,000, Plant ₹55,000, Furniture ₹26,700, Debtors ₹48,000, Bills Receivable ₹11,600, Stock ₹54,800, Bank ₹83,200; Total ₹3,64,300. On 1st April 2024, R was admitted giving him a 1/5th share in future profits. Terms: (i) R brings ₹80,000 as capital but cannot bring goodwill in cash – goodwill calculated based on R's share and capital contribution; (ii) Partners will not withdraw goodwill share nor will goodwill appear in books; (iii) General Reserve transferred to Partners' Capital Accounts; (iv) Provision for doubtful debts @ 2% on debtors; (v) Creditors liability of ₹1,440 to be written back; (vi) Stock written down by 10%; (vii) Building revalued at ₹1,00,000/-, Plant at ₹60,000/-, Furniture at ₹24,000/-; (viii) Partners agreed asset/liability values remain same in books – revaluation effect ignored; goodwill computation ignores revaluation effect. Prepare: (1) Revaluation Account, (2) Capital Accounts of partners, (3) Balance Sheet of New Firm.

Following is the Receipts and Payments Account of Smart Club for the year ended on 31st March, 2025: Receipts: Balance b/d ₹2,50,000; Subscription ₹4,20,000; Donation for Match Fund ₹55,000; Sale of Match tickets ₹20,000; Entrance Fees ₹85,000; Total ₹8,30,000. Payments: Salaries and Wages ₹1,65,000; Office Expenses ₹35,000; Telephone Charges ₹28,000; Match Expenses ₹1,10,000; Electricity Charges ₹32,000; Sports Equipment ₹2,50,000; Travelling and Conveyance ₹65,000; Balance c/d ₹1,45,000; Total ₹8,30,000. Additional Information: (i) Subscriptions include ₹40,000 received for year ended 31.3.2024. Subscriptions due but not received on 31.3.2025 = ₹25,000. Advance subscription received for year ending 31.3.2025 pertaining to 2025-26 = ₹35,000. Advance subscriptions received for year ended 31.3.2024 includes ₹14,000 pertaining to year 2024-25. (ii) Opening Balance of Match Fund on 1st April 2024 = ₹30,000. (iii) Outstanding Salaries and Wages = ₹40,000 for year ended 31.3.2025. (iv) Depreciate Sports Equipment by 25% for year ended 31.3.2025. (v) Capitalize 50% of Entrance Fees. Prepare Income and Expenditure Account of the Club for year ended 31st March, 2025 and Balance Sheet as on that date.

From the following information supplied by Mr. D, prepare a Bank Reconciliation Statement as on 31st March, 2025 after amending the cash book on that date: (1) Bank overdraft as per Bank statement ₹20,000 (2) Cheques issued but not presented for payment ₹11,000 (3) Cheques recorded in the bank column of the cash book but not sent to the Bank for collection ₹3,000 (4) Payment received from customers directly by the bank ₹6,000 (5) Bank charges debited in the statement ₹40 (6) Cheques deposited with the Bank but not collected ₹9,000 (7) A bill for ₹5,000 discounted with the Bank in February at ₹4,960 dishonoured on 31st March and noting charges paid by the bank ₹20 (8) Premium of life policy of D paid by the Bank on his standing advice ₹350 (9) Overdraft balance (Cr.) on 15th March, 2025 of ₹14,000 was carried over as debit balance on the next day in cash book

P owed ₹2,00,000 to Q. On 1st October, 2024, P accepted a bill drawn by Q for the due amount for 3 months. Q got the bill discounted with his bank for ₹1,98,000 on 3rd October, 2024. On 31st December, 2024, before the due date, P approached Q for renewal of the bill. Q agreed on the conditions that ₹1,00,000 alongwith interest at 12% per annum for 3 months on the amount of ₹1,00,000/- will be paid and P would accept a new bill for three months for the balance amount. These arrangements were carried out on 2nd January, 2025. However, on 2nd April, P became insolvent and only 40% of the amount could be recovered from his estate. Pass the necessary Journal entries (with narration) in the books of both P and Q.

Alpha Limited has an Authorized Equity Share Capital of ₹20 lakhs divided into equity shares of ₹100 each and 10% Redeemable Cumulative Preference Shares of ₹5.00 lakhs divided into ₹100/- per share. The paid-up equity capital is of ₹13,50,000/- and 10% Redeemable Cumulative Preference Shares of ₹100 each of ₹3,00,000/-. Balances in other accounts: Securities Premium ₹35,000/-, Profit & Loss Account ₹80,000/- and General Reserve ₹4,00,000/-. The Company has investments of the face value of ₹40,000/- being carried in the books at a cost of ₹45,000/-. The Company has decided to redeem the Cumulative Preference Shares at 10% premium, partly by making an issue of equity shares of the face value of ₹1,50,000/- at a premium of 10%. Investments are sold at 110% of their face value. All preference shareholders have been paid off except 2 holders holding 500 shares. Pass the necessary Journal Entries for effecting the above transactions.

ABC Limited has issued 1,20,000 Equity shares of ₹10 each at premium of ₹2 per share for public subscription payable as follows: On application ₹2 per share; on allotment ₹5 per share (including premium); on first call ₹2 per share; on second and final call ₹3 per share. Application received for 1,80,000 shares. Allotment made pro rata to the applicants for 1,44,000 shares, the remaining applications being refused. T, to whom 4,800 shares has been allotted, failed to pay the allotment and first call money and his shares have been forfeited. After the second and final call has been made, N, to whom 6,000 shares have been allotted, has also failed to pay the two calls. His shares have also been forfeited. Subsequently, out of these forfeited shares, 7,800 shares (including all shares of T) were re-issued to P as fully paid-up at ₹8 per share. Show the necessary Journal Entries and entries in Cash Book.

From the following particulars, ascertain the value of inventories as on 31st March, 2025: Inventory as on 1st April, 2024: ₹1,76,900; Purchases: ₹9,64,000; Manufacturing Expenses: ₹1,90,000; Selling Expenses: ₹78,500; Administrative Expenses: ₹25,000; Financial Expenses: ₹24,900; Sales: ₹15,37,000. (i) At the time of valuing inventory as on 31st March, 2024, a sum of ₹7,500 was written off on a particular item remaining in the balance, which was originally purchased for ₹70,000 and was sold during the year for ₹65,000. Barring the transaction relating to this item, the gross profit earned during the year was 20% on sales. (ii) On 15th March, 2025, the goods of the sale value of ₹20,000 (included in above sales) were sent on sale or return basis to a customer, the period of approval being four weeks. He returned 40% of the goods on 10th April, 2025, approving the rest.