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


FOUNDATION COURSE EXAMINATION (June -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.  Decrease in the amount of creditors results generally
A.      Increase in cash
B.      Decrease in cash
C.      Increase in assets
D.      No change in assets
[Hint: Creditors decreases when they make payments]
ii.      Provision for bad debt is made as per the
A.      Entity concept
B.      Conservatism Concept
C.      Cost Concept
D.      Going Concern Concept
[Hint: Provide for all possible losses but anticipate no gain]
iii.    Capital expenditures are shown in the
A.      Balance Sheet
B.      Profit & Loss A/c
C.      Trading A/c
D.      Manufacturing A/c
[Hint: Nominal items are shown in Trading & Profit and Loss Account and capital items are shown in Balance Sheet]
iv.     Import duty of new material purchased is a
A.      Revenue Expenditure
B.      Capital Expenditure
C.      Deferred Revenue Expenditure
D.      None of the above
[Hint: Any Expenses shown in Trading & Profit and Loss is revenue expenditure]
v.       Life Insurance Corporation Account is a
A.      Nominal Account
B.      Artificial Personal Account]
C.      Representative Personal Account
D.      Real Account
[Hint: Name of any school, Bank, college, company, corporation, society are covered under artificial personal A/c]
vi.     Goods taken from business for personal use by the proprietor should be credited to
A.      Drawing A/c
B.      Capital A/c
C.      Sales A/c
D.      Purchase A/c
[Hint: Drawings A/c is debited and Purchase A/c is credited]
vii.   A cash book with discount and bank column is called as
A.      Single Column Cash Book.
B.      Two Column Cash Book.
C.      Three Column Cash Book.
D.      Petty Cash Book.
viii. The periodical total of Returns Inward Day Book is posted to
A.      Debit of Sales Account.
B.      Debit of Sales Return Account.
C.      Credit of Sales Return Account.
D.      Debit of Debtors Account.
[Hint: Return Inward Book = Debit
Return Outward Book = Credit
Sales Book = Credit
Purchases Book = Debit
Bills Receivable Book = Debit
Bills Payable Book = Credit]
ix.     The process of transfer of entries form day book to ledger is called as
A.      Balancing
B.      Journal Posting
C.      Transaction
D.      Ledger Posting
[Hint: Day Books are Journal and transfer of entries from journal to ledger is called posting]
x.       Which financial statement represents the accounting equation as – Assets = Liabilities + Owner’s equity?
A.      Income Statement
B.      Statement of Cash Flows
C.      Balance Sheet
D.      Either (A) or (B)
[Hint: Accounting Equation is derived from dual aspect concept]
xi.     In case the depreciable asset is revalued, the provision for depreciation is based on
A.      Market Value of the Assets.
B.      Historical Cost of the Assets.
C.      Depreciated Value of the Assets.
D.      The revalued amount over the estimate of the remaining useful life of such asset.
[Hint: Para 26 of AS 6 states that where the depreciable assets are revalued the provisions for depreciation should be Based on revalued amount]
xii.   The Depreciation Account is closed at the end of the year by transfer to the
A.      General Reserve A/c
B.      Profit and Loss A/c
C.      Provision for Depreciation A/c
D.      Fixed Assets A/c
[Hint: 1st Entry:- Depreciation A/c is debited and Assets A/c is credited.
2nd Entry:- Profit and Loss A/c is debited and Depreciation A/c is credited]
xiii. The original cost of the machine is Rs. 19,00,000; machine installation charges are Rs. 1,00,000; working life of the machine is 5 years and residual value is Rs. 40,000. If the depreciation is charged on Straight Line basis then 4th year’s depreciation will be
A.      Rs. 3,72,000
B.      Rs. 4,00,000
C.      Rs. 3,92,000
D.      Rs. 3,52,000
[Hint: Depreciation = (19,00,000+1,00,000-40,000)/5 = 19,60,000/5 = 3,92,000]
xiv. Whenever errors are noticed in the accounting records, they should be rectified
A.      At the time of preparation of Trial Balance.
B.      Without waiting the accounting year to end.
C.      After the preparation of final accounts
D.      In the next accounting year.
xv.   A purchase of Rs. 49,500 from Shiva was recorded in Purchases Book as Rs. 59,400, the profit would show
A.      An increase of Rs. 9,900.
B.      A decrease of Rs. 9,900
C.      An increase of Rs. 59,400
D.      Neither an increase nor a decrease
[Hint: This error results in increase is purchase by Rs. 9,900 there by decreases profit by Rs. 9,900]
xvi. Form the following details ascertain the adjusted bank balance as per Cash Book – overdraft as per Cash Book Rs. 1,60,000; cheque received entered twice in the Cash Book Rs. 10,000; credit side of bank column cast short by  Rs. 1,000; bank charges amounting to Rs. 400 entered twice:
A.      Rs. 1,61,000
B.      Rs. 1,71,000
C.      Rs. 1,70,000
D.      Rs. 1,70,600
xvii.     When credit balance as per pass book is the starting point of a Bank Reconciliation Statement then bank charges are
A.      Subtracted
B.      Added
C.      Either (A) or (B)
D.      None of the above
xviii.   Retirement of bill means
A.      Making payment before the due date.
B.      Cancellation of the bill.
C.      Sending the bill for collection.
D.      Endorsing the bill in favour of third party.
xix. At the time of dishonour of an endorsed bill, which account would be credited by the drawee?
A.      Bills Payable Account
B.      Drawer’s Account
C.      Bank Account
D.      Bills Dishonoured Account
[Hint: Bills Payable Account is debited and Drawer’s Account is Credited]
xx.   If a bill drawn on 13th July, 2018 for 30 days, payment  must be made on
A.      16th August, 2018
B.      15th August, 2018
C.      12th August, 2018
D.      14th August, 2018
xxi. At the end of the accounting year bills receivable discounted were Rs. 32,000 would be shown
A.      On Liabilities side of the Balance Sheet.
B.      On Assets side of the Balance Sheet.
C.      By way of a note with Balance Sheet.
D.      Not appeared any where
[Hint: It is a Contingent liability]
xxii.     X sends out goods to Y, costing Rs. 3,60,000. Goods are to be sold at cost plus 25% on sales. The consignor asked consignee to pay an advance for an amount equivalent to 60% of sales value. The amount of advance will be
A.      Rs. 2,88,000
B.      Rs. 2,16,000
C.      Rs. 2,70,000
D.      Rs. 3,36,000
xxiii.   X sends out certain goods to Y, costing Rs. 1,50,000 at cost plus 25% on invoice price. ¾ of the goods were sold by Y at Rs. 1,76,000. Commission 5% upto invoice value and 10% of any surplus above invoice value. The amount of commission will be
A.      Rs. 10,100
B.      Rs. 11,975
C.      Rs. 10,568.75
D.      Rs. 9,350
xxiv.    A purchased goods costing Rs. 2,60,000 for joint venture with B. B sold a major part of the goods at cost plus 25% on cost, for Rs. 2,50,000. Balance of goods were taken over by B at cost less 10%. Find out profit/loss on Joint Venture.
A.      (Loss) Rs. 10,000
B.      Rs. 55,250
C.      Rs. 44,000
D.      Rs. 50,000
xxv.      Which of the following account(s) is (are) maintained in the joint venture when separate set of books are maintained?
A.      Joint Bank A/c
B.      Joint Venture A/c
C.      Co-Venturer A/c
D.      All of the above
xxvi.    The Manufacturing Account is prepared
A.      To ascertain the profit or loss on the goods produced.
B.      To ascertain the cost of the manufactured goods.
C.      To show the sale proceeds from the goods produced during the year.
D.      Both (B) and (C)
[Hint: Trading Account = Gross Profit or Gross Loss/ Profit & Loss Account = Net Profit or Net Loss/ Balance Sheet = Position]
xxvii.  At the time of preparation of financial account, balance of Bad Debts Recovered Account will be transferred to
A.      Debtor’s Personal A/c
B.      Profit & Loss A/c
C.      Bad Debts A/c
D.      Profit & Loss Appropriation A/c
[Hint: Transferred to credit side of Profit & Loss Account]
xxviii.            In case of not for profit making concern, endowment fund receipt is treated as
A.      Capital Receipt
B.      Revenue Receipt
C.      Either (A) or (B)
D.      Neither (A) or (B)
[Hint: Capital receipts:- It is occasional in nature.]
xxix.    Any donation received for a specific purpose should be credited to
A.      Income and Expenditure Account
B.      Capital Fund
C.      Special Fund
D.      Either (A) or (B)
xxx.      Income and Expenditure Account shows subscriptions at Rs. 2,50,000. Subscriptions accrued in the beginning of the year and at the end of the year were Rs. 25,000 and Rs. 37,500 respectively. The amount of subscription received appearing in receipts and payments account will be
A.      Rs. 2,37,500
B.      Rs. 2,75,000
C.      Rs. 1,87,500
D.      Rs. 2,62,500
[Hint: Subscription received = 2,50,000
Add:- Accrued at the end = 37,500
Less:- Accrued in the beginning = 25,000 = 2,62,500]
(b) State whether the following statements are True or False:         1x12=12
i.         It is generally assumed that the business will not liquidate in the near forcible future because of entity concept.  False, [Hint: Going concern concept]
ii.       Freight paid on purchase of machinery is to be treated as revenue expenditure.  False, [Hint: Capital Expenditure]
iii.      Bank Reconciliation Statement is a part/component of financial statements.  True
iv.     Capital Account is a real account in nature. False, [Hint: Personal]
v.       Under straight line method of depreciation, the cost of the asset written off in equal proportion during its economic life.   True
vi.     Total of Purchase Day Book is short by Rs. 10,000 will not affect trial balance.    False, [Hint: Trial Balance will not match]
vii.    A credit balance in the pass book indicates excess of deposits over withdrawals.  True
viii.  In case of endorsement of bill, endorser debits endorsee and credits B/P Account.   False, [Hint: Credits B/R Account]
ix.     In sole trade, income tax treated and recorded as drawings.   True
x.       At the end of the accounting year outstanding subscription is shown as liability in Balance Sheet.      False, [Hint: Assets]
xi.     The Balance Sheet will give the information regarding the financial position for a particular period.     True
xii.    Income and Expenditure Account closely resembles the Profit and Loss Account of a trading concern.   True

(c) Match the following Column A with Column B:                             1x6=6

Column A

Column B
1
Preliminary Expenses
A
Revenue Received
2
Interest Received
B
Bill of Exchange
3
Patent Account
C
Fictitious Asset
4
Obsolescence
D
Current Liability
5
Days of Grace
E
External Cause of Depreciation
6
Outstanding Salary for Rs. 25,000
F
Real Account

Answer any four questions out of the following six questions:    8x4=32
2. ABC Ltd. presented the following particulars as on 31st March, 2019, pass the necessary closing entries:
Particulars
Amount (Rs.)
1. Sales
2. Return Inward
3. Purchase
4. Wages
5. Return Outward
6. Salaries
7. Rent
8. Bad Debts
9. Closing Stock
10. Discount Received
11. Discount Allowed
12. Interest Received
13. Opening Stock
14. Sale of scrap items
15. Abnormal loss of material
16. Profit on sale of old furniture
1,50,000
15,000
75,000
7,500
7,500
12,000
6,000
1,500
22,500
4,500
6,000
4,500
15,000
1,000
2,000
4,000

3. On 1st July, 2017 KC Limited purchased a machine for Rs. 13,30,000. Expenses incurred on its freight Rs. 45,000 and installation Rs. 1,25,000. On 1st May, 2018 another machine was purchased and installed for Rs. 15,60,000. The machine purchased on 1st July, 2017 was sold on 31st May, 2018 for Rs. 12,20,000. Depreciation is charged by the company @ 15% per annum on written down value basis.
Prepare Machinery Account for the year 2017-18 and 2018-19, if the books are closed on 31st March in every year.
4. The bank balance as per bank statement of Agni & Co as on 31st March, 2019, shows a credit balance of Rs. 19,500. On scrutiny with cash book the following point were noted:        8
a)      Cheques of Rs. 15,900. On deposited on 29.03.2019 but two cheques of Rs. 9,500 credited by the bank on 03.04.2019.
b)      Cheques of Rs. 5,900 directly deposited with the bank on 28.03.2019 but not recorded in the cash book.
c)       As per standing instruction, bank has paid Rs. 2,500 against telephone bill and Rs. 1,200 for electric bill for the month of March, 2019 but intimation received on 3rd April, 2019.
d)      Some cheques of Rs. 16,000 issued to creditors on 30.03.2019, of those cheques of Rs. 6,200 were presented by 31.03.2019
e)      Bank has debited Rs. 500 for issuing cheque books but not recorded in cash book.
f)       One cheque of Rs. 2,000 deposited with the bank on 15.03.2019 but the bank credited Rs. 1,970 on 20.03.2019.
g)      An amount of Rs. 11,200 on maturity of fixed deposit transferred to current account but no entry was made in the Cash Book.
5. P, Q and R undertake to erect an office building for a Company. The contract price is agreed at Rs. 25,00,000 to be paid in cash Rs. 22,00,000 and the balance amount is shares of the company. They agreed to share profit or loss equally.
They opened a Joint Bank Account with cash contributed by P for Rs. 3,00,000; by Q Rs. 3,75,000 and by R Rs. 2,00,000. P arranges the preparation of building plans and paid Rs. 32,000 as architect’s fees. Q brings a concrete mixer and machines for Rs. 80,000 and R brings a motor van valued at Rs. 75,000.
They paid Rs. 12,25,800 for material; Rs. 7,33,200 for wages; Rs. 60,000 for plant; and Rs. 20,000 for sundry expenses. On completion of the joint venture, concrete mixer is sold for Rs. 50,000 and plant and allied machines are sold as crap for Rs. 10,000. R takes back the van at Rs. 40,000.
Subsequently P took over the shares issued by the company at a valuation of Rs. 2,80,000.
Show the
a)   Joint Venture Account
b)   Joint Bank Account
6. The following Receipt and Payment account and other details are related to Moon Memorial Trust, this commences its function from 1st April, 2018 with a capital fund of Rs. 50,000 in cash and furniture of Rs. 10,000:
Particulars
Amount (Rs.)
Particulars
Amount (Rs.)
To, Balance b/d
To, Donation for general purpose
To, Legacies
To, Subscription
To, Furniture sold
50,000
60,000
16,000
14,000
2,000
By, Salaries
By, Conveyance
By, Rent
By, Stationeries
By, Books and Journals
By, Building
By, Balance c/d
24,000
6,000
12,000
2,000
9,400
68,000
20,600

1,42,000

1,42,000
Other information:
a)      Building was purchased on 1st April, 2018.
b)      Books and journals include Rs. 4,000 for purchase of books.
c)       Provide depreciation on furniture @ 10%, on building @ 10% and on books @ 25%.
d)      Outstanding expenses on account of rent are Rs. 1,000 and salary is Rs. 2,000.
e)      An outstanding subscription at the end of the year 2018-19 was Rs. 15,000 and subscription received in advance for 2019-20 was Rs. 5,000.
Prepare Income and Expenditure Account for the year ended 31st March, 2019 and the Balance Sheet as at 31st March, 2019.          8
7. Laxmi owned Durga Rs. 1,20,000. Durga draws a bill on Laxmi for that amount for 3 months on 1st April, 2018. Laxmi accepts it and returns it to Durga. On 15th April, Durga discounts it with AX Bank at a discount of 10% per annum. On the date the bill was dishonoured, the bank paid noting charges of Rs. 150. Durga settles the bank’s claim with noting charges in cash. Laxmi accepted another bill for four months for the amount due plus interest @ 12% per annum on 1st July, 2018. Before the new bill became due, Laxmi retires the bill with a rebate of Rs. 750. Show the journal entries in the books of Durga.    8

Section – B
8. Choose the correct answer from the given four alternatives:               1x12=12
i.        All indirect costs are termed as
A.      Prime Cost
B.      Factory Cost
C.      Conversion Cost
D.      Overheads
[Hint: Overheads includes factory, office and selling overheads and Shown on absorption Basis]
ii.      CAS-21 is related to
A.      Cost Accounting Standard on Overburden Removal Cost.
B.      Cost Accounting Standard on Interest and Financing Charges.
C.      Cost Accounting Standard on Joint Cost.
D.      Cost Accounting Standard on Quality Control.
iii.    On the basis of “Relationship with accounting period” costs are classified as
A.      Historical Costs and Pre-determined Costs.
B.      Capital Costs and Commercial Costs.
C.      Capital Costs and Revenue Costs.
D.      Product Costs and Period Costs.
iv.     Cost of staff services is an example of
A.      Committed Costs
B.      Policy and Managed Costs
C.      Discretionary Costs
D.      Step Costs
[Hint: Discretionary Costs are there which can be reduced or eliminated in the short term]
v.       Which of the following is not a method of costing?
A.      Process Costing
B.      Batch Costing
C.      Direct Costing
D.      Operating Costing
vi.     The written down value of the abandoned plant less its salvage value is
A.      Imputed Cost
B.      Sunk Cost
C.      Avoidable Cost
D.      Opportunity Cost
vii.   The costs are differentiated between fixed and variable costs under
A.      Marginal Costing
B.      Direct Costing
C.      Standard Costing
D.      Absorption Costing
viii. Which of the following is a suitable cost unit for the BPO Services/ Call Centers?
A.      Cost per item
B.      Cost per hour
C.      Cost per account handled
D.      Cost per minute
ix.     Interest on own capital is
A.      Cash Cost
B.      Notional Cost
C.      Part of Prime Cost
D.      Semi-variable Cost
x.       Variable costs are fixed
A.      For a period.
B.      Per unit.
C.      For a particular process of production.
D.      Depends upon the entity.
xi.     Advertisement costs are treated as
A.      Direct Expenses
B.      Cost of Production
C.      Selling Overhead
D.      Distribution Overhead
xii.   Direct Wages Rs. 2,05,000 and Factory Cost Rs. 5,60,000. If the ratio of direct wages and factory overhead is 5:3 then Direct Material Cost will be
A.      Rs. 2,32,000
B.      Rs. 3,50,000
C.      Rs. 3,41,667
D.      Rs. 2,24,000
Answer any one question out of the following two questions:       8x1=8
9. Given: Factory Cost Rs. 61,50,000; Factory Overhead Rs. 10,50,000 (which are 40% of Direct Wages); Administrative overheads are recovered at 10% of Factory Cost and Selling and Distribution Overheads would be 5% of Sales. If the profit margin is 25% on cost then find out the
Direct Material
Direct Wages
Prime Cost
Cost of Production
Selling and Distribution Overhead
Cost of Sales
Profit
Sales Value
10. Prepare a statement of cost from the following data to show the material consumed, prime cost, factory cost, cost of goods sold and profit for the year 2018-19.
Particulars
Amount (Rs.)
1. Purchase of raw material during the year
2. Wages paid
3. Power and Fuel
4. Rent of factory
5. Salary of office employee
6. Rent of office
7. Show room rent
8. Salary and commission of salesman
9. Sales
13,50,000
7,50,000
2,00,000
1,00,000
50,000
25,000
15,000
30,000
30,00,000

Other information:
Stock
Opening (Rs.)
Closing (Rs.)
Raw material
Work in progress
Finished goods
90,000
36,000
1,80,000
75,000
45,000
1,65,000

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