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Past papers/ Adv Accounting/ September 2025
Paper 42 Qs
Question Paper · September 2025

CA Inter Adv Accounting

This page contains all 42 questions from the CA Inter Advanced Accounting Question Paper for the September 2025 attempt cycle, sourced from CATS, CA Exams.

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Q.1 05 marks medium Tax Accounting, Deferred Tax Assets and Liabilities ⚡ Try this Q →
Amber Limited purchases a building at a cost of ₹ 2,00,000 on 1st April 2021, as useful life is 4 years and an expected salvage value is zero. Depreciation is allowed @50% in 1st year and rest balance in 2nd year for Tax purpose. Straight-line method is considered for accounting purpose. Prepare the Tax Adjustment Account as on 31st March 2025 for Tax purpose. The company tax rate is 30% in all 4 years. You are required to calculate Current Tax, Deferred Tax Assets/Liability and Tax Expense for each year.
ICAI

Official Suggested Answer

Sep 2025 · ICAI BoS

As per AS 9 "Revenue Recognition", in a transaction involving the sale of goods, performance should be regarded as being achieved when the following conditions are fulfilled:
(i) the seller of goods has transferred to the buyer the property in the goods for a price or all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership; and
(ii) no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods.

(i) Trade discounts given should be deducted in determining revenue. Thus 12% should be deducted from the amount of turnover for the purpose of recognition of revenue.
The adjustment of sale figure to the extent of discount is correct as per AS 9 'Revenue Recognition'.

(ii) Dividends from investments in securities are not recognized in the statement of profit and loss until a right to receive payment is established. In the given situation, the dividend is proposed on 30th March, 2025, while it is declared on 30th April, 2025. Thus, the right to receive the payment of dividend gets established on 30th April, 2025.
The recognition of ₹ 10 lakhs on accrual basis in the end of the financial year 31st March, 2025 is not correct as per AS 9 'Revenue Recognition'.

(iii) In case of goods sold on approval basis, revenue should not be recognized until the goods have been formally accepted by the buyer or the buyer has done an act adopting the transaction or the time period for rejection has elapsed or where no time has been fixed, a reasonable time has elapsed.
Therefore, revenue should be recognized for the ₹ 90,000 upon receipt of approval on 31st January, 2025 and for the balance ₹ 60,000 on 15th March, 2025 as the time period for rejecting the goods had expired.

(iv) 20,000 goods lying unsold with consignee should be treated as closing inventory and sales should be recognized for ₹ 60,000. In case of consignment sale revenue should not be recognized until the goods are sold to a third party.
The recognition of ₹ 60,000 revenues in the book for the year 2024-25 is correct as per AS 9 'Revenue Recognition'.

Source: ICAI Board of Studies. open source PDF ↗

CTTP

Worked Solution

✓ Verified

This question is governed by AS 22 – Accounting for Taxes on Income (Accounting Standard 22, issued by ICAI). The core concept is that when depreciation charged for accounting purposes (SLM) differs from tax-allowable depreciation, a timing difference arises, resulting in either a Deferred Tax Liability (DTL) or Deferred Tax Asset (DTA).

Step 1 – Book Depreciation (SLM): Annual depreciation = ₹2,00,000 ÷ 4 = ₹50,000 per year for all four years.

Step 2 – Tax Depreciation: Year 1 (2021-22): 50% × ₹2,00,000 = ₹1,00,000. Year 2 (2022-23): Balance = ₹2,00,000 − ₹1,00,000 = ₹1,00,000. Years 3 & 4: NIL (fully depreciated for tax).

Step 3 – Timing Differences and DTL/DTA Computation:

YearBook Dep (₹)Tax Dep (₹)Timing Diff (₹)NatureDTL/(DTA) for year (₹)Cumulative DTL (₹)
2021-2250,0001,00,000(50,000)DTL created50,000 × 30% = 15,00015,000
2022-2350,0001,00,000(50,000)DTL created50,000 × 30% = 15,00030,000
2023-2450,000NIL50,000DTL reversed50,000 × 30% = (15,000)15,000
2024-2550,000NIL50,000DTL reversed50,000 × 30% = (15,000)NIL

When Tax Dep > Book Dep: taxable income < accounting income → tax paid currently is less → DTL created (future tax obligation).
When Book Dep > Tax Dep: taxable income > accounting income → tax paid currently is more → DTL reversed (past obligation settled).

Note on Current Tax and Tax Expense: Since Profit Before Depreciation and Tax (PBDT) is not provided in the question, individual figures for Current Tax (= Taxable Profit × 30%) and Tax Expense (= Accounting Profit × 30%) cannot be computed. However, the relationship holds as: Tax Expense = Current Tax + Deferred Tax (for the year).

Step 4 – Tax Adjustment Account (Deferred Tax Liability Account):

Dr. Deferred Tax Liability Account Cr.

DateParticulars₹DateParticulars₹
31.03.2023Balance c/d30,00031.03.2022P&L A/c (DTL created)15,000
31.03.2023P&L A/c (DTL created)15,000
30,00030,000
31.03.2024P&L A/c (reversed)15,00001.04.2023Balance b/d30,000
31.03.2024Balance c/d15,000
30,00030,000
31.03.2025P&L A/c (reversed)15,00001.04.2024Balance b/d15,000
31.03.2025Balance c/dNIL
15,00015,000

Conclusion: The total DTL created over Years 1 & 2 = ₹30,000, fully reversed by 31st March 2025 (end of Year 4), leaving zero balance — confirming that all timing differences self-reverse over the asset's life, consistent with AS 22.

AS 22 – Accounting for Taxes on Income (ICAI)Section 32 of the Income Tax Act 1961 (Depreciation allowance)
PLAN

Write it like this

Time target 9 min

1The skeleton

- Name AS 22 in line 1 — write 'As per AS 22 – Accounting for Taxes on Income' before anything else; examiners are trained to tick the standard reference first, so burying it costs you easy marks.
- Build the depreciation comparison table first — lay out Book Dep vs Tax Dep vs Timing Difference in a columnar format; this single table earns you 2–3 marks on its own because it shows your working transparently.
- Label the nature of each timing difference explicitly — write 'DTL created' or 'DTL reversed' in a separate column; don't make the examiner infer it, because unsigned numbers in a table are ambiguous and risky.
- Multiply timing difference × tax rate in a visible step — show '₹50,000 × 30% = ₹15,000' inline; skipping this step looks like you guessed the answer even if it's correct.
- Draw the ledger account with proper Dr/Cr sides and dates — the question says 'Prepare the Tax Adjustment Account', so a T-account with Balance b/d, P&L A/c entries, and Balance c/d is non-negotiable; a narrative answer here scores zero for format.
- Close with one line confirming self-reversal — state 'Cumulative DTL as on 31.03.2025 = NIL, confirming all timing differences have reversed over the asset's life'; this shows conceptual closure and examiners reward it.',

2Examiner-rewarded phrases

“timing difference arising due to difference in depreciation as per books and as per Income Tax Act”“deferred tax liability is created to the extent of ₹___ being ___% of the timing difference of ₹___”“the cumulative deferred tax liability stands reversed to NIL on the last day of the asset's useful life, in accordance with AS 22”

3Common trap

Don't fall for this

Most students flip the DTL/DTA label in Years 3 and 4 — when tax dep becomes NIL, taxable income exceeds book income, so you're *paying more tax now than your expense*, which reverses the DTL (not creates a DTA). Writing 'DTA created in Year 3' is a conceptual error that kills 2 marks even if your numbers are right.

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Q.1 00 marks easy Cost Accounting, Inventory Valuation ⚡ Try this Q →
SR Limited is a manufacturing company engaged in the production of Finished goods "M" for which Raw material "RP" is required. The company provides following information for the year ended March 31, 2025:
CTTP

Worked Solution

✓ Verified

Incomplete Question Data: The question for SR Limited (Part b) references information to be provided for the year ended March 31, 2025, but the actual data table — such as opening stock, purchases, consumption figures, production data, closing stock quantities/values, or cost details for Raw Material 'RP' and Finished Goods 'M' — has not been included in the question as submitted.

General Approach for Inventory Valuation (Cost Accounting):

Had the data been available, the typical solution framework for such a question would be:

Step 1 — Raw Material 'RP' Valuation: Prepare a Raw Material Stock Account or a Statement of Raw Material Consumed using the formula: Opening Stock + Purchases − Closing Stock = Material Consumed. Closing stock of raw material is valued at cost (weighted average or FIFO as specified).

Step 2 — Cost of Production Statement for 'M': Build up the cost of finished goods using: Material Consumed + Direct Labour + Direct Expenses = Prime Cost; Prime Cost + Factory/Manufacturing Overhead = Works Cost / Cost of Production; adjust for opening and closing WIP to arrive at Cost of Goods Produced.

Step 3 — Finished Goods Valuation: Opening Stock of Finished Goods + Cost of Goods Produced − Closing Stock of Finished Goods = Cost of Goods Sold. Closing stock of finished goods is valued at cost of production per unit × closing units.

Step 4 — Final Answer: State the value of closing stock of RP and/or M and Cost of Goods Sold as required.

Note to Examiner/Student: Please provide the complete data (opening stocks, purchase quantities and rates, wages, overhead absorption rates, production and sales figures) so that a complete numerical solution can be prepared. The answer cannot be computed without the underlying figures.

CAS-6 (Cost Accounting Standard on Material Cost)AS 2 - Valuation of Inventories (ICAI)
PLAN

Write it like this

1The skeleton

- Lead with the Raw Material Stock Statement first — examiners follow a top-down cost build-up, so dump your RP figures in a clean columnar statement (Opening Stock + Purchases − Closing Stock = Consumption) before touching finished goods; this signals you know the sequence.
- Label each stage explicitly: Prime Cost → Works Cost → Cost of Production → Cost of Goods Sold — write these as bold sub-headings in your statement; examiners scan for these exact words when allocating step marks, so even a partially wrong number earns marks if the stage label is correct.
- Show per-unit cost of production clearly — divide total Cost of Production by units produced and box it; closing stock of finished goods is valued at this figure, and that boxed number is often where the final mark sits.
- Value closing RM at cost and closing FG at cost of production — state the valuation basis in one line ('Closing stock of RP valued at cost on weighted average basis'); this 1-line statement is a free half-mark most students skip.
- Reconcile with a Cost of Goods Sold line at the end — Opening FG + Cost of Production − Closing FG = COGS; writing this formula explicitly, even if your numbers are slightly off, shows method and protects your step marks.

2Examiner-rewarded phrases

“Cost of production per unit = Total cost of production ÷ Units produced during the period”“Closing stock of finished goods is valued at cost of production”“Statement of Cost of Production for the period ended...”

3Common trap

Don't fall for this

Heads up — most students mix up 'Cost of Production' with 'Cost of Goods Sold' and use the wrong figure to value closing finished goods stock; closing FG must be valued at cost of production per unit (not COGS per unit), and if you use COGS here the examiner will cut the valuation marks even if your totals balance.

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Q.1 02 marks easy Share Buyback - Capital Structure ⚡ Try this Q →
Case: Quick Limited is in business of production of life saving medicines. It has sufficient cash funds available with it. It decided to buy back shares to the maximum permissible limit on 4th July 2024. On 1st July 2025, the company has the following Capital Structure: Equity Share Capital (Shares of ₹ 100 each fully paid) ₹ 45.00 lakhs, General Reserve ₹ 74.00 lakhs, Securities Premium Account ₹ 30.00 lakhs, Profit & Loss Account ₹ 25.00 lakhs, Revaluation Reserve ₹ 4.00 lakhs, Statutory Reserve ₹ 5.50 lakhs, Loan Funds ₹ 350.00 lakhs. Quick Limited is considering to reduce the Loan Fund amount to…
What will be Equity Share Capital after buy-back?
(A) ₹ 30,50,000
(B) ₹ 33,75,000
(C) ₹ 45,50,000
(D) ₹ 39,50,000
CTTP

Worked Solution

✓ Verified

Answer: (A)

Under Section 68 of the Companies Act 2013, a company may purchase its own shares up to a maximum of 25% of the aggregate of paid-up capital and free reserves.

Step 1: Calculate Free Reserves
Free reserves are reserves freely available for distribution (excluding restricted reserves):
- General Reserve: ₹74.00 lakhs
- Securities Premium Account: ₹30.00 lakhs
- P&L Account: ₹25.00 lakhs
- Revaluation Reserve: ₹4.00 lakhs (Excluded — restricted)
- Statutory Reserve: ₹5.50 lakhs (Excluded — restricted)

Total Free Reserves = ₹129.00 lakhs

Step 2: Calculate Maximum Buyback Amount
Maximum Buyback = 25% × (Paid-up Capital + Free Reserves)
= 25% × (₹45.00 + ₹129.00)
= 25% × ₹174.00
= ₹43.50 lakhs

Step 3: Calculate Number of Shares to be Bought Back
Buyback Price per share = ₹250 + (20% of ₹250) = ₹300 per share
Shares to be bought back = ₹43.50 lakhs ÷ ₹300 = 14,500 shares

Step 4: Calculate Reduction in Equity Share Capital
Reduction = 14,500 shares × ₹100 (face value) = ₹14.50 lakhs

Step 5: Equity Share Capital After Buyback
Equity Share Capital after buyback = ₹45.00 lakhs − ₹14.50 lakhs = ₹30.50 lakhs = ₹30,50,000

Section 68 of the Companies Act 2013Rule 16 of the Companies (Share Capital and Debentures) Rules 2014
PLAN

Write it like this

Time target 3 min 36 sec

1The skeleton

- Cite Section 68 upfront — write '25% of paid-up capital and free reserves under Section 68' in your very first line; examiner's eye goes straight to the section peg before reading your numbers.
- Explicitly exclude Revaluation Reserve and Statutory Reserve with a reason — don't just drop them silently; write '(excluded — restricted, not freely distributable)' next to each; that one-liner earns partial marks even if your final figure slips.
- Separate the 25% cap calculation as its own labelled step — write 'Max Buyback = 25% × (₹45 + ₹129) = ₹43.50 lakhs'; examiners award a step mark here before they even check Step 4.
- Apply buyback PRICE to find number of shares, then apply FACE VALUE to reduce capital — these are two separate lines; conflating them is the single biggest mark-killer on this question type.
- State the final Equity Share Capital as a positive residual — write '₹45.00 − ₹14.50 = ₹30.50 lakhs' explicitly; don't assume the examiner will subtract for you.

2Examiner-rewarded phrases

“'aggregate of paid-up share capital and free reserves as per the last audited balance sheet'”“'revaluation reserve and statutory reserve are not free reserves and hence excluded from the computation'”“'reduction in paid-up capital = number of shares bought back × face value per share'”

3Common trap

Don't fall for this

Watch out — most students knock ₹43.50 lakhs straight off the equity capital, forgetting that capital reduces only by face value of shares repurchased, not the total buyback outflow. You'll get the wrong answer AND lose method marks if you skip the 'shares ÷ buyback price → shares × face value' two-step.

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Q.1 05 marks medium Deferred Tax - AS-22 ⚡ Try this Q →
Amber Limited purchases a building at a cost of ₹ 2,00,000 on 1st April 2021, for which it is to be repaid it it a cost and an expected scrap value is ₹ nil. Depreciation is allowed at 50% in 1st year and rest balance in 2nd year for Tax purpose. Straight-line method is considered for accounting purpose. Amber Limited profit before depreciation and taxes are as follows: 2021-2023: ₹ 18,00,000 2022-2023: ₹ 22,00,000 2023-2024: ₹ 25,00,000 2024-2025: ₹ 30,00,000 The corporate tax rate is 30% in all 4 years. You are required to calculate Current Tax, Deferred Tax Assets/Liability and Tax Expense for each year.
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Q.1 05 marks medium Cost Accounting - Manufacturing Accounts ⚡ Try this Q →
SR Limited is a manufacturing company and engaged in the production of Finished goods 'MP' for which Raw material 'RP' is required. The company provides following information for the year ended March 31, 2025: Opening Inventory - MP: 4,000 units at ₹ 1,20,000 Opening Inventory - RP: 4,400 units at ₹ 52,800 Purchase of RP: 40,000 units at ₹ 4,80,000 Labour: ₹ 3,23,200 Overheads (Fixed): ₹ 3,15,000 Sales: 40,200 units at ₹ 11,20,000 Closing Inventory - MP: 4,200 units Closing Inventory - RP: 4,000 units
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Q.2 00 marks easy Balance Sheet / Financial Statement Preparation ⚡ Try this Q →
On 31st March 2025, the following balances are extracted from the books of Chit 14 Limited: 40,000 Equity Shares of ₹ 100 each (₹ 40.00 lakhs), Money received against share warrants (₹ 2.70 lakhs), General Reserves (₹ 6.90 lakhs), Capital Reserves of ₹ 20,000 in Revaluation Reserve (₹ 12.50 lakhs), Profit and Loss account (₹ 3.50 lakhs), Securities Premium (₹ 0.75 lakhs), Deferred tax liabilities (Net) (₹ 0.36 lakhs), 18% Debentures (secured) (₹ 5.00 lakhs), Loan from SSA Finance Corporation (₹ 10.00 lakhs), Other Long-Term Loans (unsecured) (₹ 4.25 lakhs), Short term borrowings (₹ 6.95 lakhs), Trade Payables (₹ 5.69 lakhs), Other current liabilities (₹ 1.41 lakhs), Short-term provision (₹ 1.36 lakhs), Total (₹ 101.57 lakhs).
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Q.2 02 marks easy Share Buyback - Maximum Permissible Number ⚡ Try this Q →
Case: Quick Limited is in business of production of life saving medicines. It has sufficient cash funds available with it. It decided to buy back shares to the maximum permissible limit on 4th July 2024. On 1st July 2025, the company has the following Capital Structure: Equity Share Capital (Shares of ₹ 100 each fully paid) ₹ 45.00 lakhs, General Reserve ₹ 74.00 lakhs, Securities Premium Account ₹ 30.00 lakhs, Profit & Loss Account ₹ 25.00 lakhs, Revaluation Reserve ₹ 4.00 lakhs, Statutory Reserve ₹ 5.50 lakhs, Loan Funds ₹ 350.00 lakhs. Quick Limited is considering to reduce the Loan Fund amount to…
What is the maximum permissible number of Equity Shares that can be bought back of the Loan Fund in ₹ 350 Lakhs?
(A) 14596 Shares
(B) 11256 Shares
(C) Nil Shares
(D) 6696 Shares
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Q.2 00 marks hard Business Combinations / Amalgamation ⚡ Try this Q →
Blue Limited is taking over Yellow Limited. (vi) Property, Plant and Equipment of Yellow Limited are taken over by Blue Limited at ₹36,44,500. (vii) Remaining Assets and Liabilities of Yellow Limited are taken over by Blue Limited at book value. (viii) Equity Shareholders of Yellow Limited will be issued necessary equity shares in Blue Limited at 5% premium.
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Q.3 00 marks easy Inventory Valuation ⚡ Try this Q →
The expected production for the year was 45,000 units of the MP. Due to fall in market demand, the sales price for the MP was ₹ 22 per unit and the replacement cost for the MP was ₹ 1.50 per unit on the closing day. You are required to calculate the value of Closing 'MP' and 'IF' as on 31st March 2023.
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Q.3 00 marks hard Balance Sheet Preparation, Schedule III of Companies Act 201 ⚡ Try this Q →
Given the following balance sheet items and additional information for Glad Limited, prepare the Balance Sheet of Glad Limited as on 31st March 2025 as per Schedule III of the Companies Act, 2013 (ignore previous year figures). Balance Sheet items: Freehold Land: ₹ 50.88 Plant & Machinery: ₹ 26.80 Investment in Debentures of Glad Limited: ₹ 6.00 Capital work in progress: ₹ 11.40 Trade receivables: ₹ 11.57 Inventories (finished goods) (as on 31st March 2025): ₹ 4.67 Goods-in-transit (finished goods) (as on 31st March 2025): ₹ 1.35 Call in arrears: ₹ 0.64 Cash in hand: ₹ 0.56 Balances with banks: ₹ 7.70 Total: ₹ 101.57 Additional Information: (i) The Authorised Share Capital consists of 50,000 Equity Shares of ₹ 100 each. (ii) 3,000 fully paid equity shares were allotted as consideration other than cash. (iii) Debentures of Glad Limited are acquired by the Company with the intention of holding them for more than two years. (iv) The Cost of Plant and Machinery is ₹ 41,00,000. (v) The balance in loan from SSA Finance Corporation includes ₹ 45,000 for expenditure other than in the course of business. Loan is repayable in June 2028. (vi) Short-term borrowings include: Loan from CDC Bank (secured) ₹ 4,50,000; Loan from related parties (unsecured) ₹ 2,00,000. (vii) Trade Receivable of ₹ 5,26,000 are due for more than 6 months. (viii) Bills Receivable of ₹ 58,000, maturing on 6th May 2025, have been discounted on 15th March 2025. (ix) The Company on the advice of an independent valuer revalued the freehold land of ₹ 50,50,000. (x) Inventory of finished goods includes loose tools costing ₹ 1,02,000, which do not meet the definition of Property, Plant & Equipment as per AS 10. (xi) Claims against the Company amounting to ₹ 4,15,000 have not been acknowledged as debt. (xii) Balances with banks include ₹ 24,000 with Viler Bank; which is not a Scheduled Bank.
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Q.3 02 marks easy Share Buyback - Maximum Permissible Number ⚡ Try this Q →
Case: Quick Limited is in business of production of life saving medicines. It has sufficient cash funds available with it. It decided to buy back shares to the maximum permissible limit on 4th July 2024. On 1st July 2025, the company has the following Capital Structure: Equity Share Capital (Shares of ₹ 100 each fully paid) ₹ 45.00 lakhs, General Reserve ₹ 74.00 lakhs, Securities Premium Account ₹ 30.00 lakhs, Profit & Loss Account ₹ 25.00 lakhs, Revaluation Reserve ₹ 4.00 lakhs, Statutory Reserve ₹ 5.50 lakhs, Loan Funds ₹ 350.00 lakhs. Quick Limited is considering to reduce the Loan Fund amount to…
What is the maximum permissible number of Equity Shares that can be bought back of the Loan Fund at ₹ 350 Lakhs?
(A) 14596 Shares
(B) 11256 Shares
(C) Nil Shares
(D) 6666 Shares
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Q.3 00 marks hard Accounting Standards - Valuation and Revenue Recognition ⚡ Try this Q →
CNJ2: The expected production for the year was 45,000 units of the MP. Due to fall in market demand, the sales price for the MP was ₹ 22 per unit and cost for the RP was ₹ 11.50 per unit on the closing day.
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Q.3(a) 04 marks hard Accounting Standards / Revenue Recognition ⚡ Try this Q →
Discuss whether the below treatment is as per relevant Accounting Standard.
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Q.3b 07 marks hard Cash Flow Statement, Financial Analysis ⚡ Try this Q →
Based on the summarised Balance Sheet of Magnolia Limited (as given), with the following additional information: (i) Depreciation charged on Plant & Machinery and Land & Building during the year was ₹ 50,000 and ₹ 1,00,000 respectively. (ii) Income Tax of ₹ 17,500 was paid during the year. (iii) An Interim Dividend of ₹ 1,00,000 has been paid. Prepare Cash Flow Statement from Operating Activities for 31st March 2025.
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Q.4 00 marks hard Amalgamation/Acquisition - Purchase Consideration and Post-A ⚡ Try this Q →
Property, Plant and Equipment of Yellow Limited are taken over by Blue Limited at ₹ 36,44,500. Remaining Assets and Liabilities of Yellow Limited are taken over by Blue Limited at their book value. Equity Shareholders of Yellow Limited will be issued necessary equity shares in Blue Limited at 5% premium. You are required to: (i) Calculate the Purchase consideration. (ii) Prepare Balance Sheet of Blue Limited after absorption as at 31st March 2023.
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Q.4 02 marks easy Buy-back of shares - Companies Act 2013 ⚡ Try this Q →
What will be the maximum number of shares that can be bought back as per Companies Act, 2013 according to the decision made on basis of above two questions?
(A) 14500 Shares
(B) 11250 Shares
(C) Nil Shares
(D) 6000 Shares
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Q.4 14 marks very hard Consolidation, Balance Sheet Analysis ⚡ Try this Q →
Case: Balance sheet data provided for Blue Limited (₹ in Lakhs) and Yellow Limited (₹ in Lakhs) showing Equity and Liabilities, Assets including Goodwill, Property Plant and Equipment, Inventories, Trade Receivables, Cash in hand, Balances with banks.
The following are the summarized Balance Sheet of Blue Limited and Yellow Limited as at 31st March 2023.
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Q.5 02 marks easy Dividend Declaration - Companies (Declaration & Payment of D ⚡ Try this Q →
As per Rule 7 of the Companies (Declaration & Payment of Dividends) Rules, 2014, in the event of inadequacy or absence of profits in any year, a Company may declare dividend out of surplus subject to the fulfilment of the condition that total amount to be drawn from such accumulated profits shall not exceed as appearing in the latest audited financial statement.
(A) 1/5th of the sum of its paid-up share capital
(B) 1/10th of the total assets
(C) 1/10th of the sum of its paid-up share capital and free reserves
(D) 1/5th of the sum of its paid-up share capital and free reserves
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Q.5 00 marks easy Balance Sheet Preparation, Schedule III, Companies Act 2013 ⚡ Try this Q →
Case: Chia Limited - Balance sheet preparation based on provided transaction details and adjustments including: Share capital (5,000 equity shares of ₹100 each), debentures, loans from SBA Finance Corporation and bank borrowings, trade receivables, inventory, plant & machinery, freehold land, and various adjustments.
You are required to prepare the Balance Sheet of Chia Limited as on 31st March 2025 as per Schedule III of the Companies Act, 2013 (ignore previous year figures).
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Q.5 05 marks hard Amalgamation, Business Absorption, Goodwill Calculation ⚡ Try this Q →
Case: Business absorption scenario with 5 specified conditions involving share consideration, current assets, inter-company liabilities, inventory revaluation, and goodwill computation.
On 31st March 2023, Blue Limited absorbs the business of Yellow Limited on the following terms: (i) Equity share holders of Yellow Limited are to be paid at 10% discount by issue of 10% Debentures at par in Blue Limited. (ii) 8% is unsecured current asset of ₹ 1,16,000 in the books of Yellow Limited, which is taken over by Blue Limited. (iii) Trade payables of Yellow Limited included ₹ 1,50,000 payable to Blue Limited. (iv) Inventory of Yellow Limited is taken over by Blue Limited at 10% more than its book value. (v) Goodwill of Yellow Limited on absorption is to be computed based on two times of simple average profit of preceding three financial years (2021-2022: ₹ 4,20,000; 2022-2023: ₹ 3,90,000; and 2023-2024: ₹ 4,50,000). In the year 2022-2023, there was an embezzlement of cash by an employee amounting to ₹ 30,000, which has already been adjusted in the profit for the year 2023-2023.
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Q.5 14 marks very hard Consolidated Financial Statements ⚡ Try this Q →
Case: Seva Limited acquired 80% equity shares of Meya Limited on 1st April 2024. (i) The Authorised Share Capital of Seva Limited is ₹9,000 Lakh divided into Equity Shares of ₹10 each and that of Meya Limited is ₹6,000 Lakh divided into Equity Shares of ₹10 each. (ii) General Reserve and Profit & Loss Account of Meya Limited stood at ₹2,000 lakh and ₹800 lakh respectively. (iii) On 1st November 2024 Meya Limited issued one fully paid up bonus share for every three shares held out of balances of its general reserve as on 31st March 2024.
The following were the summarized Balance Sheets of Seva Limited and its subsidiary Meya Limited as at 31st March 2025
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Q.6 02 marks easy Segment Reporting - AS 17 ⚡ Try this Q →
Case: Case Scenario - II: PTU Limited has 6 segments namely P, Q, R, S, T & U. The total revenues (internal and external), profit and losses and assets are set out below: Segment | P | Q | R | S | T | U | Total External Sales | 66 | 94 | 6 | 5 | 70 | 9 | 250 Internal Sales | 10 | 5 | 10 | 10 | 10 | 5 | 50 Result (P&L) | 22 | 4 | (4) | 3 | 20 | 1 | 46 Total Assets | 112 | 147 | 28 | 28 | 21 | 14 | 350 Based on the information given in above Case Scenario, answer the following Question Nos. 6-9 as per AS 17 'Segment Reporting'
Which would be the Reportable Segment on the basis of Overall Test?
(A) P, Q & T
(B) P, Q, S & T
(C) P & T
(D) P & Q
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Q.6a 04 marks medium AS-5, Prior period items, Accounting treatment ⚡ Try this Q →
Sinha an employee of Omni Limited went on maternity leave with pay for 9 months on 1st January 2024 up to 30th September 2024 with monthly pay of ₹1,50,000. While preparing the financial statements for the year ended 31st March 2024, the salary of Sinha for 3 months (1st January 2024 to 31st March 2024) was not provided due to omission. When Sinha joined on 1st October 2024, the whole salary for 9 months (1st January 2024 to 30th September 2024) was paid to her. With reference to AS-5 'Net Profit or Loss for the period, Prior Period Items and Change in Accounting Policies', determine if this is an example of a prior period item and state the required journal entry for F.Y. 2024-2025.
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Q.6a_or 04 marks medium AS-5, Employee benefits, Termination and reinstatement ⚡ Try this Q →
Suppose Sinha was terminated from service on 1st January 2024 and was re-instated in service by the Court on 30th September 2024. On 1st October 2024 the Company paid the 9 months salary to Sinha. What will be the treatment with reference to AS-5 in this situation? Give journal entry.
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Q.7 02 marks easy Segment Reporting - Revenue Test ⚡ Try this Q →
Which would be the Reportable Segment on the basis of Revenue Test?
(A) P, Q & T
(B) P, Q, S & T
(C) P & T
(D) P & Q
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Q.8 02 marks easy Segment Reporting - Profitability Test ⚡ Try this Q →
Which would be the Reportable Segment on the basis of Profitability Test?
(A) P, Q & T
(B) P, Q, S & T
(C) P & T
(D) P & Q
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Q.8 00 marks easy Cash Flow Statement - Operating Activities ⚡ Try this Q →
Case: Balance Sheet of Magenta Limited as at 31st March 2024 and 31st March 2025 (shown on page 015). Additional information: Depreciation charged on Plant & Machinery during the year: ₹50,000; Depreciation charged on Land & Building during the year: ₹1,00,000; Income Tax paid during the year: ₹1,75,000; Interim Dividend paid: ₹1,00,000
You are required to prepare Cash Flow Statement from Operating Activities for 31st March 2025.
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Q.9 00 marks easy Consolidated Accounts - Impairment of Assets (CN32) ⚡ Try this Q →
Case: Consolidated accounts of Bhau Limited and Yellow Limited as at 31st March 2023
You are required to calculate: (i) Value in use if discounting rate is 10% on 31st March 2023; (ii) Impairment loss to be recognized for the year ended 31st March 2023; (iii) Revised carrying amount of assets on 31st March 2023. The following are the summarized Balance Sheet of Bhau Limited and Yellow Limited as at 31st March 2023. Equity and Liabilities (₹ in Lakhs): Bhau Limited / Yellow Limited: Equity Share Capital (40,000 / 28,000), 10% Debentures (15,000 / -), 8% Debentures (- / 8,000), General Reserves (1,500 / 0.670), Retained Liability Fund - Long term (3,450 / 1,300), Trade Payables (7,400 / 4,250), Other current liabilities (1,240 / 0.880), Short-term provisions (0.710 / 0.520), Total (69,300 / 43,420). Assets: Goodwill (8,730 / 1,795), Property, Plant and Equipment (33,650 / 31,260), Inventories (8,890 / 4,800), Trade Receivables (13,535 / 4,650), Cash in hand (0.485 / 0.315), Balances with banks (1,990 / 0.600), Total (69,380 / 43,420). PV Factor @ 10%: 1.099, 0.909, 0.826, 0.751, 0.683, 0.621, 0.564
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Q.9 02 marks easy Segment Reporting - Assets Test ⚡ Try this Q →
Which would be the Reportable Segment on the basis of Assets Test?
(A) P, Q & T
(B) P, Q, S & T
(C) P & T
(D) P & Q
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Q.9 00 marks easy Asset Impairment, Discounting Rate, Carrying Amount ⚡ Try this Q →
You are required to calculate: (i) Value in case if discounting rate is 10% on 31st March 2023. (ii) Impairment loss to be recognized for the year ended 31st March 2023. (iii) Revised carrying amount of asset on 31st March 2023.
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Q.10 00 marks hard Business Amalgamation (CN32) ⚡ Try this Q →
Case: Blue Limited absorbs the business of Yellow Limited with specified terms and conditions
On 31st March 2023, Blue Limited absorbs the business of Yellow Limited on the following terms: (i) Preference shareholders of Yellow Limited are to be paid at 10% discount by issue of 10% Debentures as per Blue Limited; (ii) There is an unrectified current asset of ₹1,16,000 in the books of Yellow Limited, which is taken over by Blue Limited; (iii) Trade payables of Yellow Limited included ₹1,20,000 payable to Blue Limited; (iv) Inventory of Yellow Limited is taken over by Blue Limited at 10% more than its book value; (v) Goodwill of Yellow Limited on absorption is to be computed based on two years average profits of preceding three years (2021-2022: ₹4,40,000; 2022-2023: ₹2,33,600; 2023-2024: ₹2,33,600). Note: In the year 2022-2023, there was an embezzlement of cash by an employee amounting to ₹50,000, which has already been adjusted in the profit for the year 2022-2023.
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Q.10 02 marks easy AS-26 Intangible Assets ⚡ Try this Q →
Case: During the year 2024-2025, the Company received a subsidy of ₹ 8 lakhs from the Central Government for setting up a unit in a notified backward area. This subsidy is in the nature of promoters' contribution. During the year 2024-2025, the Company incurred ₹ 18 lakhs on publicity and research for a new consumer product, which was marketed in the same year but proved to be a failure.
As per AS-26 'Intangible Assets', what is the correct accounting treatment for ₹ 18 lakhs spent on publicity and research expenses during the year 2024-2025 ?
(A) ₹ 18 lakhs is treated as an intangible asset and amortised equally over 10 years.
(B) ₹ 18 lakhs is treated as an intangible asset and amortised equally over 5 years.
(C) ₹ 18 lakhs is treated as goodwill and appears as an asset in the Balance Sheet.
(D) ₹ 18 lakhs is charged as an expense in the Statement of Profit and Loss.
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Q.11 02 marks easy Borrowing Cost Capitalisation ⚡ Try this Q →
Case: During the year 2024-2025, the Company received a subsidy of ₹ 8 lakhs from the Central Government for setting up a unit in a notified backward area. This subsidy is in the nature of promoters' contribution. During the year 2024-2025, the Company incurred ₹ 18 lakhs on publicity and research for a new consumer product, which was marketed in the same year but proved to be a failure.
What is the amount of net borrowing cost to be capitalised ?
(A) ₹ 3,30,000
(B) ₹ 5,50,000
(C) ₹ 1,65,000
(D) ₹ 2,75,000
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Q.12 02 marks easy Deferred Grant Accounting ⚡ Try this Q →
Case: During the year 2024-2025, the Company received a subsidy of ₹ 8 lakhs from the Central Government for setting up a unit in a notified backward area. This subsidy is in the nature of promoters' contribution. During the year 2024-2025, the Company incurred ₹ 18 lakhs on publicity and research for a new consumer product, which was marketed in the same year but proved to be a failure.
In March 2025, what will be the amount of the deferred grant debited when the grant received of ₹ 30 lakhs is refunded ?
(A) ₹ 22.5 lakhs
(B) ₹ 15 lakhs
(C) ₹ 7.5 lakhs
(D) ₹ 30 lakhs
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Q.13 00 marks easy Consolidation, Intercompany elimination ⚡ Try this Q →
On 31st March 2023 Seva Limited's inventory includes goods which it has purchased for ₹23 lakh from Meva Limited. Meva Limited made a profit of ₹23 lakh. You are required to prepare Consolidated Balance Sheet of Seva Limited and its subsidiary Meva Limited as on 31st March 2025 as per Schedule III of the Companies Act, 2013.
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Q.13 02 marks easy Promoters' Contribution Accounting ⚡ Try this Q →
Case: During the year 2024-2025, the Company received a subsidy of ₹ 8 lakhs from the Central Government for setting up a unit in a notified backward area. This subsidy is in the nature of promoters' contribution. During the year 2024-2025, the Company incurred ₹ 18 lakhs on publicity and research for a new consumer product, which was marketed in the same year but proved to be a failure.
The following options have been suggested by the accountant of ZYX Limited for the accounting treatment of the subsidy received in the nature of promoters' contribution during the year 2024-2025: (i) It is not considered as a deferred income. (ii) It is not distributable as a dividend. (iii) It is treated as a capital reserve. (iv) It is not distributable as a dividend but considered as deferred income. Considering the above, what is correct with reference to the subsidy received in the nature of promoters' contribution during the year 2024-2025 ?
(A) (iii) and (iv)
(B) (i), (ii) and (iii)
(C) (i) and (iii)
(D) (i) and (ii)
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Q.13 04 marks hard Prior Period Items, AS 5 ⚡ Try this Q →
Case: Soda an employee of Onure Limited went on maternity leave with pay for 9 months on 1st January 2024 up to 30th September 2024. Her monthly pay is ₹ 1,50,000. While preparing the financial statements for the year ended 31st March 2024, the salary of Soda for 3 months (1st January 2024 to 31st March 2024) was not provided due to omission. When Soda joined on 1st October 2024 the whole salary for 9 months (1st January 2024 to 30th September 2024) was paid to her.
Soda an employee of Onure Limited went on maternity leave with pay for 9 months on 1st January 2024 up to 30th September 2024. Her monthly pay is ₹ 1,50,000. While preparing the financial statements for the year ended 31st March 2024, the salary of Soda for 3 months (1st January 2024 to 31st March 2024) was not provided due to omission. When Soda joined on 1st October 2024 the whole salary for 9 months (1st January 2024 to 30th September 2024) was paid to her. With reference to AS 5 'Net Profit or Loss for the period, Prior Period Items and Change in Accounting Policies' you are required to determine if this is an example of prior period item and are also required to post journal entry for the F.Y. 2024-2025. OR: Suppose Soda was terminated from service on 1st January 2024 and was re-instated in service by the Court on 30th September 2024 and on 1st October 2024 the Company paid the 9 months salary to Soda. What will be the treatment with reference to AS-5 in this situation? Give journal entry.
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Q.14 02 marks easy AS-15 Employee Benefits ⚡ Try this Q →
The following data apply to SRS Limited's defined benefit pension plan for the year ended 31st March 2025: Fair market value of plan assets as on 01.04.24: ₹ 10,00,000 Fair market value of plan assets as on 31.03.25: ₹ 14,25,000 Employer Contribution: ₹ 3,50,000 Benefits paid: ₹ 2,50,000 What is the actual return on plan assets as per AS-15 'Employee Benefits'?
(A) ₹ 2,50,000
(B) ₹ 5,25,000
(C) ₹ 3,25,000
(D) ₹ 3,50,000
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Q.14 00 marks easy Financial Statements, Reconstruction of Companies ⚡ Try this Q →
What are the key elements of financial statements? Explain. The following scheme of reconstruction has been approved for Mogra Limited on 1st April 2025: (i) Debenture holders of 9% Debentures of ₹ 5,00,000 accepted to receive 25% of their debt in cash and take over the Plant and Machinery of ₹ 2,85,000 in full settlement of their shares. (ii) Furniture and Fixtures which stood at the books of ₹ 5,50,000 to be written down to ₹ 4,45,000. (iii) The Freehold Premises of book value of ₹ 9,25,000 showed an appreciation of ₹ 75,000. (iv) There were capital commitments amounting to ₹ 4,50,000. These contracts are to be cancelled on payment of 5% of the contract price as a penalty. (v) Write off the profit and loss account debit balance of ₹ 1,15,000 which had been accumulated over the years. (vi) In case of shortfall, the balance of the General reserve of ₹ 90,000 can be utilized to write off the losses under reconstruction scheme. You are required to pass necessary journal entries as a part of the reconstruction process on 1st April 2025.
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Q.15 00 marks hard Branch Accounts - Debtors Method ⚡ Try this Q →
Shanti Limited situated at Chennai was incorporated on 1st April 2024. It opened two branches at Madurai and Tiruchi during the year. All goods sold to branches are at Cost plus 25%. All expenses relating to branches are paid by the Head Office. Each Branch has its own Sales Ledger and each branch maintains its own Sales Ledger for weekly statements to Head Office by the branches. The following particulars relating to the year ended 31st March 2025 are assumed from the weekly statements sent by the Branches: | Particulars | Madurai (₹ in Lakhs) | Tiruchi (₹ in Lakhs) | |---|---|---| | Credit Sales | 1,25,000 | 1,10,000 | | Cash Sales | 78,600 | 85,200 | | Sales Returns | 2,100 | 1,200 | | Trade Receivable | 34,200 | 23,600 | | Rent and Taxes | 3,200 | 4,500 | | Bad Debts | 6,000 | - | | Salaries | 16,000 | 18,000 | | General Expenses | 2,600 | 1,500 | | Goods Received from Head Office | 1,50,000 | 1,25,000 | | Advertisement | 7,500 | 5,200 | | Stock as on 31st March 2023 | 45,000 | 35,000 | You are required to prepare the Branch Accounts, as they should appear in the Books of the Head Office following Debtor's method for the year ended 31st March 2023.
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Q.15 02 marks easy AS-10 Property, Plant & Equipment ⚡ Try this Q →
KPK Limited is installing a new Plant at its production facility. It provides you the following information: Cost of the Plant (Cost as per Supplier's Invoice): ₹ 45,00,000 Estimated Dismantling Costs to be incurred after 5 years: ₹ 3,25,000 Initial Operating Losses before commercial production: ₹ 4,00,000 Interest paid to Supplier of Plant for deferred credit: ₹ 2,50,000 Initial Delivery and Handling Costs: ₹ 1,85,000 Cost of Site Preparation: ₹ 5,00,000 Consultancy charges used for advice on the acquisition of the Plant: ₹ 6,75,000 What will be cost that can be capitalized for Plant in accordance with AS-10 'Property, Plant & Equipment'?
(A) ₹ 61,85,000
(B) ₹ 62,60,000
(C) ₹ 68,35,000
(D) ₹ 58,60,000
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Q.16 00 marks easy Branch Accounting / Branch Accounts / Debit Method ⚡ Try this Q →
Case: Shanti Limited situated at Chandigarh was incorporated on 1st April 2024. It opened two branches at Madurai and Tirupati during the year. All goods sold to the branches by Head Office are invoiced at Cost plus 25%. All the transactions relating to branches are paid by the Head Office. Each Branch has its own Sales Ledger and sends weekly statements to Head Office. All cash collections are remitted daily to Head Office. The following particulars relating to the year ended 31st March 2025 are extracted from the weekly statements sent by the Branches: Particulars | Madurai (₹ in Lakhs) | Tirupat…
You are required to prepare the Branch Accounts, as they would appear in the Books of the Head Office following Debit's method for the year ended 31st March 2025.
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