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CMA FOUNDATION SOLVED PAPERS: FUNDAMENTALS OF ACCOUNTING (DEC' 2018)


FOUNDATION COURSE EXAMINATION (Dec’ 2018)
Fundamentals of Accounting
Full Marks: 100
Time Allowed: 3 Hours
The figures in the margin on the right side indicate full marks.
This question paper has two Sections
Both the Sections are to be answered subject to instructions given against each.
SECTION A
1. (a) Choose the correct answer from the given four alternatives.                          1x30=30

i.  Which of the following transaction is not recorded in cash book?
A.      Bad debt recovered
B.      Prepaid expenses
C.      Trade discount allowed
D.      Freight paid for acquitting an asset
[Hint: Trade discount is ignored from any Book]
ii.Credit purchase of fixed assets is recorded in
A.      Journal proper
B.      Purchase book
C.      Cash book
D.      Petty cash book
[Hint: Cash book = cash Transactions / Purchase Book = Credit Purchase of goods/ Journal proper = Credit purchase of assets]
iii.    Expenses paid but not accrued means
A.      Capital expenses
B.      Outstanding expenses
C.      Prepaid expenses
D.      Cash
[Hint: Outstanding expenses means due but not paid]
iv.     Till the discounted bill is paid by the acceptor, it remains as
A.      A contingent liability
B.      A current liability
C.      An asset
D.      An expense
v.       The amount of yearly depreciation under written down value method
A.      Remains same over the years
B.      Decreases year by year
C.      Increases year by year
D.      Fluctuates
[Hint: Under SLM Depreciation remains same over the years]
vi.     Goods purchased from Mr. A but wrongly entered in the account of Mr. B. The rectification of error will result in
A.      Increase in gross profit
B.      Decrease in gross profit
C.      No effect on gross profit
D.      Either A or B
vii.   When cash received for services rendered in the past
A.      Owner’s equity increases
B.      Current asset increases
C.      Profit increases
D.      None of the above
[Hint: It does not affect C.A. Equity & Income]
viii. Stock in the hand of the consignee is valued
A.      At market price or cost price whichever is less.
B.      At selling price.
C.      At cost price after inclusion of proportionate non-recurring expenses.
D.      At consignment price.
[Hint: In the book of consigner]
ix.     Noting charges are paid by
A.      The drawee
B.      The drawer
C.      The payee
D.      The acceptor
[Hint: Nothing charges are ultimately borne by drawee]
x.       The valuation procedure for stock is cost or net realisable value, whichever is lower. The procedure follows as per
A.      Historical Cost Concept
B.      Going Concern Concept
C.      Money Measurement Concept
D.      Conservatism Concept
xi.     When incomes recognised on cash basis and expenditure recognised on accrual basis, the system termed as
A.      Accrual basis of accounting
B.      Cash basis of accounting
C.      Mercantile basis of accounting
D.      Hybrid basis of accounting
[Hint: Cash basis revenues are recognised and earned only when cash is received irrespective delivery. Accrual basis Or Mercantile basis: Revenues are recognised and earned when they are realised irrespective of collections]
xii.   Which one is not considered as capital expenditure?
A.      Depreciation
B.      Architect’s fees
C.      Demolition cost
D.      Legal cost for buying property
[Hint: It is a revenue Expenses]
xiii. Legal charges paid to defend a suit on firm’s factory site is
A.      Capital expenditure
B.      Revenue expenditure’
C.      Deferred revenue expenditure
D.      Prepaid expenditure
xiv. Profit and loss account is prepared for a period of one year by following the concept of
A.      Consistency Concept
B.      Cost Concept
C.      Going Concern Concept
D.      Periodicity Concept
xv.   The trial balance checks
A.      Nature of business
B.      Valuation of closing stock
C.      Correctness of cash in hand
D.      Arithmetical accuracy
xvi. Errors in carry forward of closing balance from one year to another which affects
A.      Nominal accounts
B.      Real accounts
C.      Personal accounts
D.      Both (B) and (C)
[Hint: Real and personal Accounts are carried forward but nominal Accounts are closed by transferring them to Profit & Loss Account]
xvii.     If a bill drawn on 13th July 2018 for 60 days, payment must be made on
A.      15th September, 2018
B.      14th September, 2018
C.      13th September, 2018
D.      12th September, 2018
xviii.   If a co-venture takes away goods under memorandum joint venture account method then be will debit these goods in his book to
A.      Joint Venture account
B.      Drawings
C.      Purchase account
D.      Debtor’s account
xix. The manufacturing account is prepared
A.      To ascertain the cost of goods manufactured.
B.      To ascertain gross profit.
C.      To ascertain profit or loss on the goods manufactured.
D.      To ascertain the cost of goods sold.
xx.   Which one of the following is not a financial statement?
A.      Trial Balance
B.      Profit and Loss account
C.      Balance Sheet
D.      Fund Flow statement
[Hint: Income statement Balance sheet Funds Flows cash flow notes to accounts are financial statements]
xxi. Any revenue expense for which a separate fund is available will be
A.      Capitalized and shown in the balance sheet.
B.      Debited to income and expenditure account.
C.      Debited to the separate fund.
D.      None of the above
[Hint: Income from separate fund are added and expenses are deducted]
xxii.     ____________is not objective of accounting.
A.      Gives accurate information
B.      Keeps records in systematic manner
C.      Analyses recorded data
D.      Ascertain financial position of business
xxiii.   Which of the following is not a paper transaction?
A.      Charge of depreciation
B.      Discount received
C.      Bad debts written off
D.      Cash stolen from office
xxiv.    Which of the following is capital expenditure?
A.      Repairs of fixed asset
B.      Demolition cost
C.      Locker rent
D.      Annual subscription
xxv.      Advertising expenses for launching a new product of the company is______.
A.      Revenue expenditure
B.      Capital expenditure
C.      Deferred revenue expenditure
D.      Deferred capital expenditure
xxvi.    __________does fulfill the function of both a journal and a ledger.
Purchase book
Cash book
Sales book
Bills Payable book
xxvii.  Which of the following is artificial personal account?
A.      SBI account
B.      Wages paid account
C.      Discount received account
D.      Drawings account
xxviii.            Accounting cycle ends with preparation of_________.
A.      The journal/ledger
B.      The trial balance
C.      The financial statement
D.      The closing entries record
xxix.    Journal proper uses to record__________.
A.      Bad debts recovered
B.      All cash purchases of assets other than goods
C.      Writing of bad debts
D.      Purchase of goods on credit
xxx.      In case of, deposited of cheque into bank but not collected, the balance is less as per________.
A.      Cash book
B.      Pass book
C.      Pass book overdraft
D.      Both (A) and (B)
(b) State whether the following statements are True or False:       1x12=12
i.         In case of non-profit organization, excess of income over expenditure is known as surplus. True
ii.       Error of omission will not affect trial balance.    True
iii.      Favourable bank balance means, debit balance in the pass book.  False, [Hint: Credit Balance]
iv.     Balance Sheet covers the position for a period and not the position of a particular day.  False, [Hint: It show the position on a particular date]
v.       Goods bought for Rs. 25,000 passed through sales day book will result an increase in gross profit. True, [Hint: GP increases by Rs. 50,000]
vi.     Statement of affairs means statement of assets and liabilities. True
vii.    A bill of exchange is a conditional order in writing given by a debtor to a creditor.   True
viii.  Accumulated depreciation account can be located in the debit side of the trial balance.  False, [Hint: Credit Side]
ix.     Closing stock appeared in the trial balance is taken to Trading Account.   False
x.       Credit balance of Joint Venture Account is a profit on Joint Venture.   True
xi.     Ownership expressed in terms of money is called Capital Account.                       True
xii.    Renewal fee for patents is revenue expenditure.                        True
(c) Match the following Column A with Column B:                             1x6=6

Column A

Column B
1
Dishonour of a bill
A
Current Assets
2
Statement furnished by consignee to consignor
B
Capital Expenditure
3
Outstanding Salaries A/c
C
Notary Public
4
Outstanding Subscription
D
Representative Personal Account
5
Preliminary Expenses
E
Intangible Asset
6
Amortization term related to
F
Account sales


G
Current Liabilities


H
Revenue Expenditure

Answer any four questions out of six questions.        8x4=32
2. Journalize the following transactions in the books of Chandu, 2018:
October 1 – Chandu started business with Rs. 25 Lakh of which 20% amount was borrowed from his friend Shaurabh.
October 5 – Office furniture purchased from Furniture Mart for Rs. 1,25,000 and one Laptop purchased for Rs. 35,500.
October 6 – Goods purchased from KC worth Rs. 4.5 Lakh at 10% trade discount and 40% of the amount was paid in cash.
October 10 – Goods sold to Rajnee for Rs. 3.2 Lakh at 20% trade discount and received one-fifth of the amount in cash.
October 14 – Goods destroyed by fire of Rs. 52,000 which was uninsured.
October 18 – Paid to KC Rs. 1,85,000 and discount received Rs. 3,700.
October 22 – Received from Rajnee Rs. 2 Lakh in full settlement of account.
October 26 – Goods costing Rs. 4,500 (Net selling price Rs. 5,400) taken away by Chandu for personal use.
3. Kush Ltd. Purchased a second had machinery on 01.04.2015 for Rs. 65,000, paid Rs. 12,400 for its overhauling and Rs. 5,500 for its installation which was completed by 30.06.2015. The company provides depreciation on its machinery at 15% per annum on the basis of diminishing value method from the date it is put to use and closes its books on March 31 every year. On 01.10.2016, a repair work was carried out on the machine and Rs. 4,000 were paid for the same. The machine was sold on 31.01.2018 for a sum of Rs. 52,000 and an amount of Rs. 462 was paid as dismantling charges. Prepare Machinery Account from 2015 – 16 to 2017 – 18.
4. Prepare a bank reconciliation statement as on 31st October, 2018 from the following information and show the balance of pass book:
a)      Credit balance as per bank column of cash book Rs. 3,57,500.
b)      Three cheques amounting of Rs. 1,20,000 were issued but one cheque for Rs. 28,000 was not presented during the month.
c)       Cheques deposited into bank for Rs. 1,50,000 but Rs. 1,15,000 not yet collected.
d)      Gas bill for Rs. 12,000 paid directly by bank.
e)      Interest on investment for Rs. 15,000 was collected by bank but entered in the cash book as Rs. 51,000.
f)       Bank charges Rs. 3,000 not entered in the cash book.
g)      A customer directly deposited Rs. 16,500 into bank for which there was no entry in the cash book.
h)      A debit of Rs. 7,800 in the pass book in respect of dishonoured cheque but no corresponding entry in the cash book.
5. The debit side of the trial balance of JP & Associates showed Rs. 5,500 less than credit side. Difference of the trial balance was put in the suspense account. Later the following errors were detected:
a)      Goods retuned by a customer for Rs. 3,000 entered in the customer’s account but not entered in the sales retuned account.
b)      Goods sold to Nayan on credit for Rs. 7,000 was entered in the sales book but not posted to his account.
c)       Rs. 5,800 paid by Mohan Traders was credited to their account as Rs. 580.
d)      Rs. 2,600 due from Virat was not entered in the schedule of sundry debtors.
e)      Purchase book was overcast by Rs. 1,880.
Pass the necessary rectification entries without giving narration and prepare Suspense Account.
6. Bhatiya Krida Parishad gives you the following Receipts and Payments Account for the year ended 31st March, 2018:
Receipts
Amount (Dr.)
Payment
Amount (Cr.)
To Balance b/d
Cash in hand
Cash at bank
To Subscription
To Admission fee
To interest on Investment @ 10 p.a. for full year
To Donation

1,500
14,200
75,000
13,500
10,000

2,000
By Salaries
By Sports equipment
By Stationary
By Maintenance of ground
By Prizes
By Balance c/d
Cash in hand
Cash at bank
22,000
50,000
2,000
8,000
1,000

23,200
10,000

1,16,000

1,16,000

Other information:

On  01.04.2017
On 31.03.2018
(i) Subscription due
(ii) Advance subscription
(iii) Land & Building (cost less depreciation)
(iv) Salaries outstanding
4,000
800
2,00,000
1,000
5,500
500
1,90,000
2,000
You are required to prepare Income and Expenditure Account for the year 31st March, 2018 and Balance Sheet as on that date.
7. Bivas sent goods to Arpan on consignment basis. As per terms, Arpan will have to receive 20% commission on invoice price and 10% on sale value above the invoice price. Arpan will meet all his expenses himself. Bivas sent goods whose cost were Rs. 32,000 at a proforma invoice price cost plus 25% and spent Rs. 3,000 on freight charges. Arpan accepted a bill for Rs. 32,000 immediately on receiving the consignment. His expenses were Rs. 400 as rent and Rs. 200 as insurance. Arpan sold 80% of goods for Rs. 41,600. Part of sale were on credit and one customer failed to pay Rs. 800.
You are required to prepare Consignment Account and Arpan’s Account in the books of Bivas.

SECTION – B
8. Choose the correct answer from the given alternatives:           1x12=12
i.        A technique and process of ascertaining costs is known as
A.      Cost
B.      Costing
C.      Cost Accounting
D.      Cost Accountancy
[Hint:  Cost Accounting:- It is a Branch of Accounting dealing with cost.]
[Hint: Cost Accountancy:- Application of Costing & Cost Accounting Principles]
ii.      The branch of the accounting dealing with the classification, recording, allocating, summarizing and reporting of current and prospective costs, is known as
A.      Financial Accounting
B.      Management Accounting
C.      Cost Accounting
D.      Cost Accountancy
iii.    Which of the following is not a function of Cost Accountancy?
A.      Cost Control
B.      Cost Ascertainment
C.      Cost Analysis
D.      Cost Accounting
iv.     Which of the following ‘CAS’ is related to ‘Pollution Cost’?
A.      CAS – 11
B.      CAS – 13
C.      CAS – 14
D.      CAS – 17
v.       Costs are classified between direct and indirect costs according to method of classification by
A.      Nature or Element
B.      Functions
C.      Degree of traceability to product
D.      Change in Activity or Volume
[Hint: Nature or Element:- Material, labor & other expenses]
[Hint: Functions:- Production cost/ Commercial cost]
[Hint: Change in Activity or Volume:- Fixed, variable & Semi variable]
vi.     Depreciation on building is an example of
A.      Committed Costs
B.      Policy and Managed Costs
C.      Discretionary Costs
D.      Step Costs
vii.   When the volume of output is increased then the per unit fixed cost will be
A.      Increase in the proportion of output.
B.      Decrease in the reverse proportion of output.
C.      Changed but not in proportion of output.
D.      Unchanged.
viii. Which of the following costing method is suitable for Toy Making Industry?
A.      Contract Costing
B.      Process Costing
C.      Job Costing
D.      Batch Costing
ix.     Which of the following is not a technique of costing?
A.      Marginal Costing
B.      Process Costing
C.      Standard Costing
D.      Budgetary Costing
x.       Excise duty is an example of
A.      Chargeable expense
B.      Factory Overhead
C.      Administrative Overhead
D.      Non-cost item
xi.     Interest on own capital is
A.      Cash cost
B.      Notional cost
C.      Sunk cost
D.      Part Prime cost
[Hint: Notional cost: Notional cost is any imaginary cost that have been included in the cost for decision making purposes.]
xii.   Over which the following costs, management is likely to have least control?
A.      Wages cost
B.      Building Insurance cost
C.      Machinery Breakdown cost
D.      Advertisement cost
Answer any one question out of the following two questions.           8x1=8
9. Classify the following expenses items according to functions such as Factory Overhead, Office & Administrative Overhead and Selling & Distribution Overhead:
i.         Printing and Stationery
ii.       Legal Expenses
iii.      Showroom Expenses
iv.     Demonstration Expenses
v.       Carriage Outwards
vi.     Motive Power
vii.    Audit Fees
viii.  Market Research Expenses
ix.     Technical Director’s Fees
x.       Materials Handling Charges
xi.     Samples and Gifts
xii.    Storekeeper’s Salary
xiii.  Cost of Tenders
xiv.  Postage and Telegram
xv.   Loose and Tools Written-off
xvi.  Cost of Catalogues

Solution:-
Factory overheads
i.         Technical Director’s Fees
ii.        Loose and Tools Written-off
iii.      Motive Power
iv.     Materials Handling Charges
Office & Administrative
i.         Printing and Stationery
ii.       Legal Expenses
iii.      Audit Fees
iv.     Postage and Telegram
Selling & Distribution Overheads
i.         Showroom Expenses
ii.       Carriage Outwards
iii.      Samples and Gifts
iv.     Storekeeper’s Salary
v.       Cost of Catalogues
vi.     Cost of Tenders
vii.    Market Research Expenses
viii.  Demonstration Expenses
10. Following information gathered from the cost accounting records of ABC Associates for the year 2017-18:
Particulars
Amount (Rs.)
(a) Opening Stock – Raw Material
Work in progress
Finished goods
(b) purchase of material during the year
(c) Wages paid
(d) Carriage Inwards
(e) Factory overhead
(f) Administrative overhead
(g) Selling and distribution overhead
(h) Sales
(i) Closing Stock-Raw material
Work in progress
Finished goods
90,000
36,000
1,80,000
13,50,000
7,50,000
28,500
3,00,000
75,000
45,000
30,00,000
75,000
45,000
1,65,000
You are to prepare a Cost Sheet showing the following:
i.         Prime Cost
ii.       Factory Cost
iii.      Cost of goods sold
iv.     Profit for the year
Solution:-
Cost Sheet of ABC Associates
For the year ended on 31-03-2018
Particular
Amount (Rs.)
Opening Stock of Raw Material
Add:- Purchase of Raw Material
Carriage Inwards

Less:- Closing Stock of Raw Material                                                      
Raw Material Consumed
Add:- Wages
(i) Prime cost
Add:- Factory Overheads
Works cost incurred
Add:- Opening Work in progress
Less:- Closing Work in progress
(ii) Works cost
Add:- Office & Administrative overhead
Cost of production
Add:- Opening Stock of Finished goods
Less:- Closing Stock of Finished goods
(iii) Cost of goods sold
Add:- Selling and Distribution overheads
Cost of Sales
(iv) Add:- Profit
Sales
90,000
13,50,000
28,500
14,68,500
75,000
13,93,500
7,50,000
21,43,500
3,00,000
24,43,500
36,000
45,000
24,34,500
75,000
25,09,500
1,80,000
1,65,000
25,24,500
4,500
25,69,500
4,30,500
30,00,000

***

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