Launch offer — 25% off with code LAUNCH-25 See plans →
Try now → N
Past papers/ Adv Accounting/ May 2017
Paper 9 Qs
Question Paper · May 2017

CA Inter Adv Accounting

This page contains all 9 questions from the CA Inter Advanced Accounting Question Paper for the May 2017 attempt cycle, sourced from VSI Jaipur.

9 worked solutions ready
Sign up free to unlock every solution + bare-Act citations + how-to-write skeletons. 30 seconds, no card, no spam. Already signed up? Log in.
🎯 Practice this paper now

Drill 5 questions from this paper — instant grading

Real ICAI questions, instantly graded with bare-Act citations. ~5 minutes. No signup.

Drill 5 questions →
‹ All papers Ask in chat Start drilling →
Q.1 05 marks medium AS 9 - Revenue Recognition ⚡ Try this Q →
Raj Ltd. entered into an agreement with Heena Ltd. to dispatch goods worth ₹ 15,00,000 per month for next 6 months in receipt of entire payment. Heena Ltd. accordingly made the entire payment of ₹ 30,00,000 and Raj Ltd. started dispatching the goods. In fourth month, Heena Ltd. could not accept the goods dispatched so far but not dispatched goods until further notice. Due to this, Raj Ltd. is holding the remaining goods worth ₹ 15,00,000 ready for dispatch. Raj Ltd. accounted ₹ 15,00,000 as sales and transferred the balance to Advance received against Sales account. Comment upon the above treatment by Raj Ltd. with reference to the provisions of AS 9.
CTTP

Worked Solution

✓ Verified

AS 9 Revenue Recognition requires:

Under AS 9, revenue from sale of goods shall be recognized when: (a) significant risks and rewards of ownership have been transferred to the buyer; (b) the seller has no continuing managerial involvement or effective control; (c) revenue can be reliably measured; and (d) it is probable that economic benefits will flow to the entity.

Analysis of Raj Ltd.'s Treatment:

Raj Ltd.'s accounting is INCORRECT and does not comply with AS 9. The ₹15,00,000 recorded as sales is premature and unjustified. Here's why:

First, the ₹15,00,000 recognized as Sales is improper: The goods worth ₹15,00,000 remain with Raj Ltd. as "ready for dispatch." Since the buyer (Heena Ltd.) has REFUSED acceptance and the goods have not been delivered to the buyer, the significant risks and rewards of ownership have NOT transferred. Revenue cannot be recognized merely because goods are ready for dispatch. Per AS 9, physical dispatch of goods coupled with acceptance by the buyer is essential for revenue recognition.

Second, there is no reasonable certainty of realization: The buyer has explicitly refused to accept goods from month 4 onwards, creating uncertainty about ultimate cash realization. This breach of contract or suspension creates a contingency. AS 9 requires reasonable certainty of ultimate realization in cash or cash equivalents. The buyer's refusal negates this certainty for the undisputed goods.

Third, the accounting conflates payment received with delivery accepted: The ₹30,00,000 advance should be matched ONLY with goods actually delivered and accepted by the buyer. For months 1 and 2, if goods were delivered and accepted, revenue of ₹30,00,000 could have been recognized against this advance. The goods dispatched in month 3 (if any) that were rejected, and the ₹15,00,000 yet to be dispatched, must NOT be recognized as revenue.

Correct Treatment under AS 9:

1. Revenue should be recognized only for goods delivered and accepted: If goods worth ₹30,00,000 (months 1–2) were delivered and accepted by Heena Ltd., this amount should be recognized as revenue and the advance matched against it.

2. Rejected/on-hold goods should NOT be recognized as sales: The goods worth ₹15,00,000 (month 3 onwards) that were refused or remain on hold should NOT be included in sales revenue. These goods remain the asset of Raj Ltd.

3. Treatment of unmatched advance: Any portion of the ₹30,00,000 advance that exceeds accepted goods should continue to be shown as "Advance received against sales" (a liability), not reclassified based on goods merely ready for dispatch.

4. Subsequent resolution: Once the dispute is resolved—either the buyer accepts the goods or the contract is cancelled—appropriate adjustments should be made. If the buyer ultimately refuses, the goods should be adjusted as returned inventory, and the advance should be refunded or adjusted accordingly.

Conclusion: Raj Ltd.'s accounting is incorrect. It violates the fundamental principle of AS 9 by recognizing revenue before significant risks and rewards transfer and without reasonable certainty of realization.

AS 9 - Revenue Recognition, paragraphs 8-10 (recognition criteria)AS 9, paragraph 17 (sale of goods recognition condition)AS 9, paragraph 23 (timing of recognition)
PLAN

Write it like this

Time target 9 min

1The skeleton

- Lead with AS 9's four conditions for revenue recognition — don't start with the story; state the law first so the examiner knows you know where you're going.
- Pin the exact violation: 'significant risks and rewards have NOT transferred' — use this phrase verbatim because examiners tick it specifically; 'goods ready for dispatch' is NOT a transfer.
- Call out the buyer's refusal as the deal-breaker — Heena Ltd. refusing acceptance means no delivery, no economic benefit inflow, so both AS 9 triggers fail simultaneously; say both, don't just say one.
- Address the ₹30,00,000 advance correctly — distinguish what portion is legitimately earned (months where goods were accepted) vs. what must stay as 'Advance received against Sales'; this is where marks hide.
- End with a crisp one-line verdict: 'Treatment by Raj Ltd. is incorrect and not in accordance with AS 9' — examiners want a conclusion sentence, not just analysis hanging in the air.

2Examiner-rewarded phrases

“significant risks and rewards of ownership have not been transferred to the buyer”“revenue shall be recognised only when it is reasonably certain that the ultimate collection will be made”“the amount shall be treated as an advance and not recognised as revenue”

3Common trap

Don't fall for this

Watch out — most students write 'goods are ready for dispatch so revenue can be recognised' and actually argue FOR Raj Ltd. The trap is confusing receipt of payment with transfer of risks and rewards. Payment received ≠ revenue earned under AS 9; goods must be dispatched AND accepted.

Q.2 16 marks very hard Amalgamation of Companies ⚡ Try this Q →
Case: Balance sheet data: P Ltd. - Equity Shares (₹100 each): ₹8,20,000; 9% Pref Shares (₹100 each): ₹3,80,000; 8% Debentures: ₹2,00,000; General Reserve: ₹1,50,000; Profit & loss a/c: ₹3,52,000; Unsecured Loan: -; Creditors: ₹88,000; Total: ₹19,90,000. Q Ltd. - Equity Shares: ₹3,20,000; 9% Pref Shares: ₹2,80,000; 8% Debentures: ₹1,00,000; General Reserve: ₹50,000; Profit & loss a/c: ₹2,05,000; Unsecured Loan: ₹1,75,000; Creditors: ₹1,60,000; Total: ₹12,90,000. Assets: Goodwill (P Ltd.: ₹1,00,000; Q Ltd.: ₹80,000); Land & Building (P Ltd.: ₹4,50,000; Q Ltd.: ₹3,40,000); Furniture & Fittings (P Ltd.:…
P Ltd. and Q Ltd. agreed to amalgamate and form a new company called PQ Ltd. The balance sheets of both the companies on the date of amalgamation stood as below:
Get the worked solution + bare-Act citation for Amalgamation of Companies
✓ 46-line worked answer · ✓ 2 bare-Act citations · ✓ 3 examiner-rewarded phrases · ✓ Common-trap warning · ✓ How-to-write skeleton
✓ Join 778 CA Inter aspirants on catargettestprep Already signed up? Log in.
Q.3 08 marks hard Building Fund - Not-for-Profit Organisations ⚡ Try this Q →
JRB Engineering College maintains a building fund. As on 31.3.2016, balance of building fund was ₹ 7,50,000 and it was represented by fixed deposit (5% p.a.) of ₹ 4,50,000 and Bank current account balance of ₹ 3,00,000. During the year 2016-17, the college collected as donations towards the building fund ₹ 4,20,000 and transferred 40% of development fees collected ₹ 16,92,375 to building fund. Opening fund in progress as on 31st March 2016 was ₹ 6,18,750 for which contractors' bill up to 70% was paid on 14.4.2016. The extension of building was finalised on 31.12.2016 costing ₹ 5,43,750 for which contractors' bill was fully met. It was decided to transfer the cost of completed buildings to ₹ 11,62,500 to the corresponding asset account. You are required to pass journal entries to incorporate the above transactions in the books of JRB Engineering College for the year 2016-17 and show the trial balance of building fund ledger.
Get the worked solution + bare-Act citation for Building Fund - Not-for-Profit Organisations
✓ 39-line worked answer · ✓ 3 examiner-rewarded phrases · ✓ Common-trap warning · ✓ How-to-write skeleton
✓ Join 778 CA Inter aspirants on catargettestprep Already signed up? Log in.
Q.3(b) 08 marks hard Interest calculation, Simple Interest Method ⚡ Try this Q →
The following transactions took place between A and B for the three months ending 31st March 2017. Books of A: | Date | Particulars | ₹ | |---|---|---| | 1.1.2017 | B's Opening balance | 1,00,000 | | 10.1.2017 | Sold goods to B | 2,00,000 | | 15.1.2017 | Cash received from B | 2,00,000 | | 13.2.2017 | Sold goods to B | 2,00,000 | | 1.3.2017 | Cash received from B | 1,00,000 | You are required to calculate the amount of interest to be paid by one party to the other at 10% per annum using Simple Method. (1 year = 365 days)
Get the worked solution + bare-Act citation for Interest calculation, Simple Interest Method
✓ 20-line worked answer · ✓ 3 examiner-rewarded phrases · ✓ Common-trap warning · ✓ How-to-write skeleton
✓ Join 778 CA Inter aspirants on catargettestprep Already signed up? Log in.
Q.4 16 marks very hard Trading and Profit & Loss Account, Balance Sheet, Journal en ⚡ Try this Q →
The following information relates to the business of ABC Enterprises, who requests you to prepare a Trading and Profit & Loss A/C for the year ended 31st March, 2017 and a Balance Sheet as on that date. (a) Assets and Liabilities as on: | | 1.4.2016 | 31.3.2017 | |---|---|---| | Furniture | 60,000 | 63,500 | | Stock | 80,000 | 70,000 | | Sundry Debtors | 1,60,000 | - | | Sundry Creditors | 1,10,000 | 1,50,000 | | Prepaid Expenses | 6,000 | 7,000 | | Outstanding Expenses | 20,000 | 18,000 | | Cash in Hand & Bank Balance | 12,000 | 26,250 | (b) Cash transaction during the year: (i) Collection from Debtors, after allowing discount of ₹ 15,000 amounted to ₹ 5,45,000. (ii) Collection on discounting of Bills of Exchange, after deduction of discount of ₹ 61,250. (iii) Creditors of ₹ 4,00,000 were paid ₹ 3,92,000 in full settlement of their dues. (iv) Payment of Freight invoiced of ₹ 30,000. (v) Amount withdrawn for personal use ₹ 70,000. (vi) Payment for office furniture ₹ 10,000. (vii) Investment carrying annual interest of 6% were purchased at ₹ 95 (200 shares, face value ₹ 100 each) on 1st October 2016 and payment made thereof. (viii) Expenses including salaries paid ₹ 95,000. (ix) Miscellaneous receipt of ₹ 5,000. (c) Bills of exchange drawn on and accepted by customers during the year amounted to ₹ 1,00,000. Of those, bills of exchange of ₹ 20,000 were endorsed in favour of creditors. An endorsed bill of exchange of ₹ 4,000 was dishonoured. (d) Goods costing ₹ 5,000 were used as advertising material. (e) Goods are invariably sold to show a gross profit of 20% on sales. (f) Difference in cash book, if any, is to be treated as further drawing or introduction of capital by proprietor of ABC enterprises. (g) Provide at 2% for doubtful debts on closing debtors.
Get the worked solution + bare-Act citation for Trading and Profit & Loss Account, Balance Sheet, Journal entries, Accounts preparation
✓ 30-line worked answer · ✓ 2 bare-Act citations · ✓ 3 examiner-rewarded phrases · ✓ Common-trap warning · ✓ How-to-write skeleton
✓ Join 778 CA Inter aspirants on catargettestprep Already signed up? Log in.
Q.5a 08 marks hard Partnership Incorporation Accounting ⚡ Try this Q →
Roshan & Reshma working in partnership, registered a joint stock company in the name of Happy Ltd. on May 31st 2016 to take over their existing business. The summarized Profit & Loss A/C as given by Happy Ltd. for the year ending 31st March 2017 shows: To Salary ₹1,44,000, To Interest on Debenture ₹36,000, To Sales Commission ₹18,000, To Bad Debts ₹49,000, To Depreciation ₹19,250, To Rent ₹36,400, To Audit fees ₹12,000, To Net Profit ₹1,33,350, Total ₹4,50,000 (By Gross Profit ₹4,50,000). Prepare a Statement showing allocation of expenses & calculation of Profit-post incorporation profit after considering: (i) GR value was constant throughout the year. (ii) Depreciation includes ₹1,250 for assets acquired in post incorporation period. (iii) Bad debts recovered amounting to ₹14,000 for a sale made in the pre-incorporation period. (iv) Total sales were ₹18,00,000 of which ₹6,00,000 were for April to September. (v) Happy Ltd had to occupy additional space from 1st Oct. 2016 for which rent was ₹2,400 per month.
Get the worked solution + bare-Act citation for Partnership Incorporation Accounting
✓ 45-line worked answer · ✓ 2 bare-Act citations · ✓ 3 examiner-rewarded phrases · ✓ Common-trap warning · ✓ How-to-write skeleton
✓ Join 778 CA Inter aspirants on catargettestprep Already signed up? Log in.
Q.5b 08 marks hard Investment Account and Share Capital Transactions ⚡ Try this Q →
Akash Ltd. had 4,000 equity shares of X Limited, at a book value of ₹15 per share (face value of ₹10 each) on 1st April 2016. On 1st September 2016, Akash Ltd. acquired 1,000 equity shares of X Limited at a premium of ₹4 per share. X Limited announced a bonus and right issue. The terms of bonus and right issue were – (1) Bonus was declared, at the rate of two equity shares for every five equity shares held on 30th September, 2016. (2) Right shares are to be issued to the existing shareholders on 1st December 2016. The company issued two right shares for every seven shares held at 25% premium. No dividend was payable on these shares. The whole sum being payable by 31st December. (3) Existing shareholders were entitled to transfer their rights to outsiders wholly or in part. (4) Akash Ltd. exercised its option under the issue for 50% of its entitlements and sold the remaining rights for ₹8 per share. (5) Dividend for the year ended 31st March 2016 was declared by the company and received by Akash Ltd. on 20th January 2017. (6) On 1st February 2017, Akash Ltd. sold half of its share holdings at a premium of ₹4 per share. (7) The market price of share on 31.03.2017 was ₹13 per share. You are required to prepare the Investment Account of Akash Ltd. for the year ended 31st March, 2017 and determine the value of share held on that date assuming the investment as current investment.
Get the worked solution + bare-Act citation for Investment Account and Share Capital Transactions
✓ 42-line worked answer · ✓ 3 examiner-rewarded phrases · ✓ Common-trap warning · ✓ How-to-write skeleton
✓ Join 778 CA Inter aspirants on catargettestprep Already signed up? Log in.
Q.6 16 marks very hard Partnership - Death of Partner, Goodwill Valuation ⚡ Try this Q →
Ram, Shyam and Laxman are in partnership sharing Profit & Loss equally. Interest on partner's capital and remuneration to partners not to be provided as at present accounting period. On 31st March, 2016 their Balance Sheet stood as follow: [Assets and Liabilities table with: Capital A/c-Ram ₹2,70,000; Capital A/c-Shyam ₹2,40,000; Capital A/c-Laxman ₹2,40,000; Current A/c-Ram ₹4,200; Current A/c-Shyam ₹6,000; Sundry Creditors ₹24,600; Total ₹7,84,800. Assets: Building ₹4,50,000; Plant & Machinery ₹90,000; Furniture & Fittings ₹60,000; Closing Stock ₹27,000; Sundry Debtors ₹60,600; Cash at Bank ₹88,200; Current A/c-Laxman ₹3,000; Total ₹7,84,800]. On 31st July, 2016 Ram died. According to the partnership deed, on the death of partner, the sum to be paid to his estate will be: Goodwill is to be valued at two years purchase of the average profits of preceding three accounting years. The profit as per blocks of Accounts were as follows: For accounting year ended 31st March, 2013: ₹ 86,700; For accounting year ended 31st March, 2014: ₹ 1,43,200; For accounting year ended 31st March, 2015: ₹ 1,07,600
Get the worked solution + bare-Act citation for Partnership - Death of Partner, Goodwill Valuation
✓ 30-line worked answer · ✓ 3 examiner-rewarded phrases · ✓ Common-trap warning · ✓ How-to-write skeleton
✓ Join 778 CA Inter aspirants on catargettestprep Already signed up? Log in.
Q.7 00 marks easy Partnership - Admission of New Partner, Balance Sheet Prepar ⚡ Try this Q →
No goodwill account is to remain in the books after any change in the partnership's constitution. The stock value at 31st July has been calculated and all other accounts balanced off, including provision for depreciation, accrued expenses and prepaid expenses. This results in the following position of assets and liabilities as 31st July 2016: Building ₹4,50,000, Stock ₹33,000; Plant & Machinery ₹97,700 (including addition of ₹12,000), Sundry Debtors ₹66,000; Furniture & Fittings ₹66,700, Cash at Bank ₹1,01,100; Sundry Creditors ₹29,400. There were no additions to, or reduction in the capital account during the four months, but the following drawings have been made by the partners: Ram ₹60,000, Shyam ₹48,000, Laxman ₹54,000. It has also been agreed that the share of deceased partner should be repaid in three equal instalments, the first payment being made on the day after the day of death. On, 1st August 2016, Ram's son Shankar was admitted in to partnership as a new partner and agreed that he would bring in to the business ₹1,20,000 at his capital together with a premium for his share of goodwill using the existing valuation. The new profit sharing ratio Shyam: 2/8, Laxman: 2/8 and Shankar 1/8. You are required to prepare the partnership firm's Balance Sheet as at 1st August 2016, on the assumption that the above transactions have been completed by that date.
Get the worked solution + bare-Act citation for Partnership - Admission of New Partner, Balance Sheet Preparation
✓ 49-line worked answer · ✓ 2 bare-Act citations · ✓ 3 examiner-rewarded phrases · ✓ Common-trap warning · ✓ How-to-write skeleton
✓ Join 778 CA Inter aspirants on catargettestprep Already signed up? Log in.
‹ All papers Ask in chat Start drilling →
Start 15-min diagnostic