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CMA FOUNDATION SOLVED PAPERS: FUNDAMENTALS OF ACCOUNTING (DEC' 2019)


FOUNDATION COURSE EXAMINATION (Dec’ 2019)
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 item is shown in the Receipt and Payment account?
A.      Only items of capital nature
B.      Only items of revenue nature which are received during the period of accounts
C.      Only items of revenue nature pertaining to the period of accounts
D.      Both the items of capital and revenue nature which are received during the period of accounts
            ii.      Any income arising from special found will be credited to
A.      General found in the Balance sheet.
B.      Receipt and Payment account.
C.      Income and Expenditure account.
D.      Special found in the Balance sheet.
          iii.      There are 100 members each paying an annual subscription of Rs. 500. The Receipt and Payment account shows arrear subscription of Rs. 4,500, advance subscriptions Rs. 6,000 and current Rs. 44,500. How much amount to be credited in the Income and Expenditure account?
A.      Rs. 55,000
B.      Rs. 49,000
C.      Rs. 44,500
D.      Rs. 50,000
           iv.      When opening stock Rs. 50,000, closing stock Rs. 40,000, purchases Rs. 1,90,000, profit margin is 16.67% on sales, the sales are
A.      Rs. 2,40,000
B.      Rs. 2,36,000
C.      Rs. 2,00,000
D.      Rs. 2,44,000
             v.      Goods bought for Rs. 25,000 passed through sales day book will result in
A.      No effect on gross profit
B.      Decrease in gross profit
C.      Decrease in net profit
D.      Increase in gross profit
           vi.      Which of the following will result in disagreement to Trial balance?
A.      Sales return treated as purchase.
B.      Purchase return treated as sales.
C.      Ram A/c wrongly credited instead of Sham A/c.
D.      Under casting cash book by Rs. 1,100.
         vii.      In a joint venture X and Y sharing profit and loss equally. X purchased goods costing of Rs. 40,000 and Y sold the goods for Rs. 50,000. X is entitled to get 1% commission on purchase and Y is entitled to get 5% commission on sales, the profit will be
A.      Rs. 7,200
B.      Rs. 7,100
C.      Rs. 6,800
D.      Rs. 7,600
       viii.      What is the nature of joint venture with co-venture account?
A.      Nominal Account
B.      Personal Account
C.      Real Account
D.      Memorandum Account
           ix.      Which of the following term is applicable about consignment?
A.      Sale of goods
B.      Hypothecation of goods
C.      Shipment of goods
D.      Mortgage of goods
             x.      Retirement of bill means
A.      Sending the bill for collection.
B.      Cancellation of the bill.
C.      Endorsing the bill in favour of third party.
D.      Making payment before the due date.
           xi.            Which one of these documents is not required for bank reconciliation?
A.      Bank column of cash book
B.      Bank pass book
C.      Previous year’s balance sheet
D.      Bank statement
         xii.      In a overdraft balance as per cash book, a cheque of Rs. 1,250 deposited into bank but not recorded in cash book will be
A.      Deducted by Rs. 1,250.
B.      Added by Rs. 1,250.
C.      Added by Rs. 2,500.
D.      Deducted by Rs. 2,500.
       xiii.      Which of these errors affects only one account?
A.      Error of casting
B.      Error of posting
C.      Error of carry forward
D.      All of the above
       xiv.      Which of the following error is an error of principle?
A.      Rs. 4,000 received from Sham credited to Shamu a/c
B.      Rs. 5,000 incurred on installation of new plant debited to salary a/c
C.      Rs. 6,000 paid for wages debited to salary a/c
D.      Rs. 7,000 being purchase of raw material debited to purchase a/c
         xv.      In case the depreciable assets are revalued, the provision for depreciation is based on
A.      Market value of the assets.
B.      Historical cost of the asset.
C.      Written down value of the asset.
D.      The revalued amount over the estimate of the remaining useful life of such asset.
       xvi.      Trade discount is allowed at the time of sale of goods
A.      Is recorded in sales book.
B.      Is recorded in cash book.
C.      Is not recorded in books of accounts.
D.      Is recorded in journal.
     xvii.      A debit note issued to a creditor for goods returned is to be recorded in the
A.      Purchase return book
B.      Journal proper
C.      Purchase book
D.      Bill receivable book
   xviii.      The determination of expenses for an accounting period is based on the concept of
A.      Consistency concept
B.      Periodicity concept
C.      Timeliness concept
D.      Industry practice
       xix.      Decrease in the amount of creditors results in
A.      Increase in assets
B.      Increase in cash
C.      Decrease in cash
D.      No change in assets
         xx.      Subscription received in advance to be shown in
A.      Liability side of the balance sheet
B.      Asset side of the balance sheet
C.      Income and Expenditure account
D.      Journal
       xxi.      Which of the following is an accounting equation?
A.      Capital = Assets + Liabilities
B.      Capital = Assets – Liabilities
C.      Assets = Liabilities – Capital
D.      Liabilities = Assets + Capital
     xxii.      AS-09 deals with
A.      Inventory Valuation
B.      Depreciation Accounting
C.      Revenue Recognition
D.      Cash Flow Statement
   xxiii.      Y – draws a trade bill of Rs. 12,000 for 6 months on X. After holding the bill for 2.5 months, Y discounts the bill with bank @ 10% p.a. The amount of discount on bill is
A.      Rs. 100
B.      Rs. 350
C.      Rs. 600
D.      Rs. 250
    xxiv.      Bills Receivable books is part of the
A.      Journal
B.      Ledger
C.      Profit & Loss Account
D.      Balance Sheet
      xxv.      X of Delhi send out certain goods at cost + 25% of cost. Invoice of goods is Rs. 1,20,000. 4/5th of the goods were sold by consignee at Rs. 1,00,000. Commission @ 2% up to invoice value and 10% of any surplus above invoice. The amount of commission will be
A.      Rs. 1,920
B.      Rs. 2,320
C.      Rs. 1,820
D.      Rs. 2,020
    xxvi.      If X co-venture takes away goods under memorandum Joint Venture Method then he will debit these goods in his books to
A.      Sales Account
B.      Purchase Account
C.      Personal Account
D.      Joint Venture Account
  xxvii.      At the end of the year Bad Debts Recovered Account is
A.      Debited to Debtors Account
B.      Credited to Debtors Account
C.      Credited to Profit & Loss Account
D.      Debited to Profit & Loss Account
xxviii.      As regards the accounting treatment, Legacy should be
A.      Treated as loss.
B.      Capitalized.
C.      Treated Revenue Expenses.
D.      Treated Deferred Revenue.
    xxix.      Sales of Rs. 6,570 is recorded in the sales book as Rs. 6,750. Such Error is known as
A.      Error of Principle
B.      Error of Omission
C.      Error of Commission
D.      Compensating error
      xxx.      Which of the following is correct?
A.      Cost of Goods Sold – Opening Stock + Purchase = Closing Stock
B.      Purchase + Cost of Goods Sold – Opening Stock = Closing Stock
C.      Cost of Goods Sold + Closing Stock – Opening Stock = Purchase
D.      Opening Stock + Closing Stock – Purchase = Cost of Goods Sold
(b) State whether the following statements are ‘True’ or ‘False’:           1x12=12
               i.      The policy of ‘anticipate no profit and provide for all probable losses’ arises due to the convention of conservatism.  True
             ii.      Single entry system records only one aspect either debit or credit.           True
            iii.      Rent outstanding is real account and shown in asset side of the balance sheet.  False
           iv.      Demand bills are payable on a date calculated after adding three days of grace to the period of the bill.   False
             v.      Bills receivable A/c is debited by the acceptor on discounting of a bill.   False
           vi.      Noting charges are related to dishonour of bill.    True
          vii.      Delcredere commission is extra commission which is given to the consignee for making him responsibility for extra sales.   False
        viii.      Joint venture does not follow accrual basis of accounting.                           True
           ix.      Closing stock, when it appears in the trial balance is taken only in the trading account.   True
             x.      Fixed assets are shown in the balance sheet at their market value less depreciation.    False
           xi.      The capital receipts and payments in receipts and payment account are to be taken to the balance sheet.  True
          xii.      When Credit sales is wrongly posted to the purchase book, it is an error of commission.                True
(c) Match the following:                             1x6=6

Column A

Column B
1
Consignment stock Account is a
A
Credit balance of pass book
2
Debit balance of cash book is equal to
B
No depreciation
3
Error of omission
C
Debit note
4
Land
D
Capital expenditure
5
Purchase return book
E
Real Account
6
Cost of copyrights
F
Transaction recorded partly


G
Nominal Account


H
Transaction recorded twice

Answer any four questions out of the following.           8x4=32
2.  Enter the following transactions of Ram Prakash & Sons in appropriate books of original entry.
2019
April 1: Started business with cash Rs. 2,00,000 and goods Rs. 1,50,000
April 2: Opened a current account in Punjab National Bank Rs. 1,00,000
April 4: Purchased goods from Hari Rs. 90,000
April 6: Sold goods to Mukesh for cash Rs. 1,25,000
April 8: Sold goods to Ramesh Rs. 15,000
April 10: Purchased furniture for shop from National Furniture, he allowed 10% trade discount Rs. 80,000
April 15: Paid to National Furniture Rs. 72,000
April 24: Sold goods to Vikram, trade discount 5% Rs. 70,000
April 29: Ramesh was declared insolvent and a dividend of 40 paisa in rupee could be received from him.
April 30: Withdraw from Bank for office expenses Rs. 10,000
3. A manufacturing company closes its book of accounts on 31st March ever year, purchased a machine for Rs. 3,00,000 on 1st April, 2015. Additional machine was purchased for Rs. 2,00,000 on 30th September, 2016 and for Rs. 1,00,000 on 1st April, 2018. One machine which was purchased on 30th September, 2016 was sold for Rs. 1,36,000 on 30th September, 2018.
Prepare the Machinery account for the year ending 31st March, 2019 taking into account depreciation at 10% per annum on the written down value.
4. The bank pass book of Mr. Sunil showed an overdraft of Rs. 15,000 on 31.03.2019. Prepare the bank reconciliation statement based on the following information:
               i.      Cheques for Rs. 2,500, Rs. 3,800 and Rs. 5,500 were issued during the month but only the cheque for Rs. 3,800 were presented.
             ii.      Five cheque amounting to Rs. 16,500 were deposited, out of that one cheque for Rs. 3,700 was credited on 4th April, 2019.
            iii.      A cheque fro an amount of Rs. 2,400 were dishonoured by bank not recorded in cash book.
           iv.      A bank charge of Rs. 100 for dishonoured cheque was also not recorded in cash book.
             v.      A cheque for Rs. 6,500 issued in settlement of a debt was encashed on 30.03.2019 but entered in cash book as Rs. 8,500.
           vi.      A customer deposited a cheque of Rs. 6,700 directly to bank but not recorded in cash book.
          vii.      Interest on overdraft Rs. 500 were charged by bank not entered in cash book.
        viii.      One fixed deposit certificate with matured value of Rs. 12,000 due to be credited within 31st March but credited by bank on 2nd April, 2019.
5. Pass necessary journal entries to rectify the following errors:
               i.      Purchase of goods of Rs. 3,000 from Nail was wrongly entered in sales book.
             ii.      Goods retuned of Rs. 1,500 by Mr. Sethi were taken into stock but return was not posted.
            iii.      One page of sales book was under cast Rs. 1,000.
           iv.      Pre-paid rent of Rs. 450 was omitted to be brought forward from last year.
             v.      A builder’s bill of Rs. 10,700 for erection of a factory shed was debited to repair account.
           vi.      A cheque for Rs. 975 received from Ramlila was credited to the account of Ramlata and debited to cash account.
          vii.      A credit sale of Rs. 2,500 has been credited to the sales and also to the trade receivable account.
6. The following is the Trial Balance of Shree Mahesh on 31st March, 2019.
Items/Account
Debit (Rs.)
Credit (Rs.)
Capital

2,00,000
Stock on 01.04.2018
2,40,000

Plant and Machinery
2,50,000

Office Furniture and Fittings
13,000

Sundry Debtors and Creditors
2,28,500
2,60,000
Purchases and Sales
10,67,500
24,00,000
Bills Receivable and Bills Payable
36,000
28,000
Return inwards and return outwards
46,500
27,500
Discount
32,500
18,500
Bad debts
12,500
-
General Expenses
5,000
-
Insurance
31,500
-
Factory Lighting
4,000
-
Rent
30,000
-
Drawings
35,000
-
Provision for Doubtful Debts
-
12,500
Salaries
70,000
-
Wages
7,50,000
-
Cash at bank
32,500
-
Cash in hand
2,000
-
Motor Vehicle
60,000
-
Total
29,46,500
29,46,500

The following adjustment are to be made:
               i.      Stock on 31st March, 2019 was Rs. 2,60,000
             ii.      Furniture to be depreciated by 5%
            iii.      Depreciation to be charged @ 15% on Plant & Machinery and on Motor Vehicle
           iv.      Factory lighting is due for 3 months, but not paid Rs. 1,500.
             v.      Write off Further bad debts Rs. 3,500
           vi.      The provision for doubtful debts to be increased to Rs. 15,000 and provision for discount on debts @ 2% to be made
          vii.      During the year machinery was purchased for Rs. 1,00,000 but it was debited to purchase account.
You are required to prepare Trading and Profit & Loss Account for the year ended on 31st March, 2019 and the Balance sheet as on 31st March, 2019.
7. X sent goods costing Rs. 37,75,000 on consignment basis to Y on 1st January, 2019 @ 9% commission. Rs. 4,12,500 was spent on transportation by X. Y spent Rs. 2,62,500 on unloading. 85% of the goods received were sold for Rs. 45,00,000, 10% of the goods for Rs. 5,00,000 and the balance were taken over by Y @ 20% below the cost price. Y has sent a demand draft to X for the amount due shows in X’s book.
Show:
               i.      Consignment Account
             ii.      Y’s Account

Section – B
8. Choose the correct answer from the given four alternatives:          1x12=12
              i.      Carriage outward is a part of
A.      Office and Administrative overhead
B.      Factory overhead
C.      Selling and Distribution overhead
D.      Prime cost
            ii.      Notional cost is also known as
A.      Variable cost
B.      Imputed cost
C.      Opportunity cost
D.      Out of Pocket cost
          iii.      Which one of the following is not a cost unit?
A.      Kilo watt hour
B.      Credit division
C.      Patient day
D.      Tonne-mile
           iv.      Cost reduction-
A.      Long – term phenomena
B.      It challenges the standards
C.      It is carried out without compromising the quality.
D.      All of the above
             v.      Statement showing break up of costs is known as
A.      Cost sheet
B.      Tender
C.      Production account
D.      Statement of profit
           vi.      Prime cost may be correctly termed as
A.      The total of all cost items which can be directly charged to product units.
B.      The sums of all direct materials and labour cost excluding all other cost.
C.      The total costs incurred in producing a finished unit.
D.      The sum of the large cost there in product cost.
         vii.      Which one is included in financial accounts but not is cost accounts?
A.      Royalty
B.      Dividend paid
C.      Excise duty
D.      Carriage and freight
       viii.      Which of the following term is excluded from the cost accounts?
A.      Income tax
B.      Interest on debenture
C.      Cash discount
D.      All of the above
           ix.      Variable costs are fixed
A.      Depend upon the entity.
B.      For a period.
C.      Per unit.
D.      For a particular process of production.
             x.      Cost are classified into fixed costs, variable costs and semi-variable costs, it is known as
A.      Behavioural classification
B.      Classification according to controllability
C.      Functional classification
D.      Element-wise classification
           xi.      The main purpose of cost accounting is to
A.      Maximise profit.
B.      Inventory valuation.
C.      Provide information for decision making.
D.      Fixation of selling price.
         xii.      Process cost is very much applicable in
A.      Construction industry
B.      Pharmaceutical industry
C.      Airline company
D.      Printing industry
9. Classify the following items of expenses into prime cost, factory overhead, office & administrative overhead, selling and distribution overhead and non-cost items.
                                 i.      Custom duty on material
                               ii.      Cost of Tenders
                              iii.      Drawing office salaries
                             iv.      Director’s Fee
                               v.      Cost of catalogues
                             vi.      Cash discount
                            vii.      Fuel and Power
                          viii.      Transfer Fee
                             ix.      Goodwill written off
                               x.      Donation
                             xi.      Salaries of watchmen and cleaners (General)
                            xii.      Packing material e.g. boxes, bardanas, tin, drums, rope etc.
                          xiii.      Repairs of delivery van
                          xiv.      Carriages inward
                           xv.      Works Telephone Expenses
                          xvi.      Legal charges

Solution:-
Prime cost
i.         Custom duty on material
ii.       Carriages inward
iii.      Packing material e.g. boxes, bardanas, tin, drums, rope etc.
Factory overhead
i.         Fuel and Power
ii.       Works Telephone Expenses
iii.      Drawing office salaries
Office & administrative overhead
i.         Director’s Fee
ii.       Salaries of watchmen and cleaners (General)
iii.      Legal charges
Selling and distribution overhead
i.         Cost of Tenders
ii.       Cost of catalogues
iii.      Repairs of delivery van
Non-cost items
i.         Cash discount
ii.       Goodwill written off
iii.      Donation
iv.     Transfer Fee
10. A factory produces a standard product. The following information is given to you from which you are required to prepare cost sheet for the period ended 31st March, 2019:
Consumable materials:      Rs.
Opening stock   -   24,000
Purchases    -  2,04,000
Closing stock  -  9,600
Finished product:
Opening stock 1000 units   -   38,400
Production during the period 10000 units
Closing stock 2000 units
Productive wages  -  48,000
Other direct expenses  - 24,000
Factory overheads    -    100% of productive wages
Office overheads  -   10% of works cost
Selling and distribution overhead  -   Rs. 4 per unit sold
There was no Work-in-progress either at the beginning or at the period. Find out the selling price per unit to earn a profit of 20% of the selling price.

Solution:-

Cost Sheet of ABC Associates
For the year ended on 31-03-2019

Particular

Amount (Rs.)
Opening Stock of Raw Material
Add:- Purchase of Raw Material

Less:- Closing Stock of Raw Material
(a) Raw Material Consumed
Add:- Productive wages
Other direct expenses
(b) Prime cost
Add:- Factory overheads -100% of productive wages
(ii) Works cost
Add:- Office & Administrative overhead
(d) Cost of production
Add:- Opening Stock of Finished goods
Less:- Closing Stock of Finished goods
(e) Cost of goods sold
Add:- Selling and distribution overhead - Rs. 4 per unit sold
Cost of Sales
Add:- Profit of (20% of the selling price or 25% of cost)
Sales











24,000
2,04,000
2,28,000
9,600
2,18,400
48,000
24,000
2,90,400
48,000
3,38,400
33,840
10000
1000
2000
3,72,240
38,400
74,448
9000
3,36,192
36,000
3.72,192
93,048
4,65,240

***

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