Q1(a)Revenue recognition timing under AS 9
0 marks easy
Case: Suman Ltd. is in the business of manufacturing electronics equipment and selling these at its various outlets. It provides installation services for the equipment sold and also provides free 1 year warranty on all sold products. Beach Resorts purchased 5 air conditioners (AC) from Suman Ltd. for ₹ 45,000 each which includes installation fees of ₹ 1,000 for each AC. The Company also offers 1 year warranty and offered ₹ 500 per AC as trade discount. Beach resort placed order on March 15, 2024, made payment on March 20, 2024. ACs were delivered on March 27, 2024 and installation was completed on …
How much revenue should be recognised by the Company as on March 31, 2024
(i) ₹ 2,25,000
(ii) ₹ 2,17,500
(iii) ₹ 2,00,000
(iv) ₹ 2,30,000
Q1(b)Revenue recognition in subsequent year
0 marks easy
Case: Suman Ltd. is in the business of manufacturing electronics equipment and selling these at its various outlets. It provides installation services for the equipment sold and also provides free 1 year warranty on all sold products. Beach Resorts purchased 5 air conditioners (AC) from Suman Ltd. for ₹ 45,000 each which includes installation fees of ₹ 1,000 for each AC. The Company also offers 1 year warranty and offered ₹ 500 per AC as trade discount. Beach resort placed order on March 15, 2024, made payment on March 20, 2024. ACs were delivered on March 27, 2024 and installation was completed on …
How much revenue should be recognised by the Company in the financial year 2024-25
(i) ₹ 5000
(ii) ₹ 2,20,000
(iii) ₹ 10,000
(iv) ₹ 2,40,000
Q1(c)Trade discount accounting under AS 9
0 marks easy
Case: Suman Ltd. is in the business of manufacturing electronics equipment and selling these at its various outlets. It provides installation services for the equipment sold and also provides free 1 year warranty on all sold products. Beach Resorts purchased 5 air conditioners (AC) from Suman Ltd. for ₹ 45,000 each which includes installation fees of ₹ 1,000 for each AC. The Company also offers 1 year warranty and offered ₹ 500 per AC as trade discount. Beach resort placed order on March 15, 2024, made payment on March 20, 2024. ACs were delivered on March 27, 2024 and installation was completed on …
What will be the accounting for trade discount
(i) The same will be recognised separately in the profit and loss
(ii) The trade discounts are deducted in determining the revenue
(iii) Trade discount will be recognised after one year, when the warranty will be over
(iv) Trade discount will be recognised after installation is complete
Q1(d)Warranty provisions under AS 29
0 marks easy
Case: Suman Ltd. is in the business of manufacturing electronics equipment and selling these at its various outlets. It provides installation services for the equipment sold and also provides free 1 year warranty on all sold products. Beach Resorts purchased 5 air conditioners (AC) from Suman Ltd. for ₹ 45,000 each which includes installation fees of ₹ 1,000 for each AC. The Company also offers 1 year warranty and offered ₹ 500 per AC as trade discount. Beach resort placed order on March 15, 2024, made payment on March 20, 2024. ACs were delivered on March 27, 2024 and installation was completed on …
Is the Company required to do any accounting for 1 year warranty provided by it
(i) No accounting treatment is required till some warranty claim is actually received by the Company
(ii) As there exist a present obligation to provide warranty to customers for 1 year, the Company should estimate the amount that it may have to incur considering various factors including past trends and create a provision as per AS 29
(iii) Accounting for claims will be done on cash basis i.e. expense will be recognised when expense is made
(iv) As the Company is not charging separately for the warranty provided, there is no need to create any provision
Q2Inventory classification under AS 2
0 marks easy
As per AS 2, Inventories include materials awaiting use in production process, what should be included in Inventories from the following
(a) Secondary Packing material required for transporting and forwarding the material
(b) Spare parts, servicing equipment and standby equipment
(c) Primary packing material which is essential to bring an item of inventory to its saleable condition, for example, bottles, cans etc., in case of food and beverages industry
(d) Publicity material
Q3Inventory valuation, fixed overhead absorption under AS 2
0 marks easy
Kirti Ltd. is in the business of manufacturing computers. During the year ended 31st March, 2024, the company manufactured 550 computers. It has the policy of valuing finished stock of goods at a standard cost of ₹ 1.8 lakh per computer. The details of the costs are: Raw material consumed ₹ 400 lakh, Direct Labour ₹ 250 lakh, Variable production overheads ₹ 150 lakh, Fixed production overheads (including interest of ₹ 100 lakh) ₹ 290 lakh. Compute the value cost per computer for the purpose of closing stock.
Q4Cash flow classification - operating, investing, and financi
0 marks easy
Purse Ltd., a non financial company has the following entries in its Bank Account. It has sought your advice on the treatment of the same for preparing Cash Flow Statement. (i) Loans and Advances given to suppliers, employees, and subsidiary companies and interest earned on them (ii) Investment made in subsidiary Wallet Ltd. and dividend received (iii) Dividend paid for the year (iv) Insurance claim received against loss of property, plant and equipment by fire. Discuss in the context of AS 3 'Cash Flow Statement'.
Q5Events after balance sheet date, adjusting and non-adjusting
0 marks easy
For five companies whose financial year ended on 31st March, 2023, the financial statements were approved by their approving authority on 15th June, 2023. During 2023-2024, material events took place. You are required to state with reasons, how each item should be dealt with in the financial statement of the various companies for the year ended 31st March, 2023.
Q6Change in accounting policy vs new accounting policy under A
0 marks easy
Explain whether the following will constitute a change in accounting policy or not as per AS 5
Q7Construction contracts, stage of completion method under AS
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Mehta ltd. has undertaken bridge construction contract wherein, bridge will be constructed in 3 years. Initial contract revenue ₹ 900 crore, Initial contract cost ₹ 800 crore. Year I: Estimated contract cost ₹ 805 crore, Contract cost incurred ₹ 161 crore. Year II: Increase in contract revenue ₹ 20 crore, Estimated additional increase cost ₹ 15 crore, Contract cost incurred ₹ 584 crore. Year III: Contract cost incurred ₹ 820 crore. At the end of year II, cost incurred includes ₹ 10 crore for material stored at the sites to be used in year III. State the amount of revenue, expenses and profit to be recognized in the Statement of Profit and Loss in these three years.
Q8Revenue recognition for inter-divisional transfers under AS
0 marks easy
When will the revenue be recognized in the case of inter divisional transfers?
Q9Exchange differences on foreign currency loans, PPE valuatio
0 marks easy
Alfa Ltd. purchased an item of property, plant and equipment for US $ 50 lakh on 01.04.2023 and the same was fully financed by foreign currency loan repayment in five equal instalments annually. Exchange rate at purchase was 1 US $ = ₹ 60. As on 31.03.2024 the first instalment was paid when 1 US $ fetched ₹ 62.00. The entire loss on exchange was included in cost of goods sold. Alfa Ltd. normally provides depreciation at 20% on WDV basis and exercised the option to adjust the cost of asset for exchange difference arising out of loan restatement and payment. Calculate the amount of exchange loss and its treatment and depreciation.
Q10Government subsidies, prior period items, events after balan
0 marks easy
Energy Ltd. has acquired a generator on 1.4.2023 for ₹ 100 lakh. On 2.4.2023, it applied to Indian Renewal Energy Development Authority (IREDA) for a subsidy. The subsidy was granted in June, 2024 after the accounts for 2023-2024 were finalized. The company has not accounted for the subsidy for the year ended 31.3.2024. State
Q11Investment valuation, diminution in value, strategic premium
0 marks easy
A company is engaged in the business of refining, transportation and marketing of petroleum products. During the financial year ended 31st March, 2024, the company acquired controlling interest from Government of India in another public sector undertaking @ ₹ 1,551 per share as against the book value of ₹ 192.58 per share and market value of ₹ 876 per share as on 18th February, 2024. A strategic premium of ₹ 675 per share was paid. The investment has been considered as long term strategic investment and accounted for at cost at ₹ 1,551 per share. No provision for diminution in value has been made. On 28th March, 2024, the acquired shares were quoted at ₹ 880 per share on BSE and the current market price as on 18th July was around ₹ 300. Management is of the view that there is no permanent diminution in the value. Required
Q12Borrowing costs capitalization, qualifying assets under AS 1
0 marks easy
Loyal Ltd. has undertaken a project for expansion of capacity. The company pays interest at 15% p.a. debited monthly. During the period, company had ₹ 20 lakh overdraft up to 31st December, surplus cash in January and again overdraft of ₹ 14 lakh from 1.2.2024 and ₹ 30 lakh from 1.3.2024. The company had a strike during December and hence could not continue the work. However, substantial administrative work related to the project was continued. Onsite work commenced on 1st January and all work completed on 31st March. Monthly expenditure: Oct 2023 (Plan ₹ 5,00,000, Actual ₹ 4,00,000), Nov 2023 (Plan ₹ 6,50,000, Actual ₹ 7,95,000), Dec 2023 (Plan ₹ 20,00,000, Actual ₹ -), Jan 2024 (Plan ₹ 2,00,000, Actual ₹ 50,000), Feb 2024 (Plan ₹ 9,00,000, Actual ₹ 2,00,000), Mar 2024 (Plan ₹ 10,00,000, Actual ₹ 12,00,000). Assume expenditure incurred on 1st day of each month. Calculate interest to be capitalized giving reasons. Assume overdraft will be less if there is no capital expenditure.
Q13Segment reporting, allocation of expenses under AS 17
0 marks easy
Whether interest expense relating to overdrafts and other operating liabilities identified to a particular segment should be included in the segment expense or not?
Q14Earnings per share calculation, adjustment for rights issue
0 marks easy
The following information is available in respect of High-end Ltd. for the accounting year 2022-2023 and 2023-2024: Net profit for 2022-2023 ₹ 22,00,000, Net profit for 2023-2024 ₹ 30,00,000, Number of shares outstanding prior to right issue 10,00,000 shares. Right issue: One new share for each five shares outstanding i.e. 2,00,000 shares at ₹ 25 with last date to exercise right 31st July, 2023. Fair value of one equity share immediately prior to exercise of rights on 31.07.2023 is ₹ 32. You are required to compute, as per AS 20
Q15Associate definition, significant influence, potential equit
0 marks easy
Hill Ltd. has a share capital of 50,000 shares @ ₹ 100 per share. Sun Ltd. acquired 15% shares in Hill Ltd. on 1.4.2024. It also acquired all the 5,000, 12% convertible debentures of ₹ 100 each of Hill Ltd. These debentures will be converted at par into equity shares of Hill Ltd. after 3 years. State whether, as per AS 23, Hill Ltd. is an Associate of Sun Ltd. or not with reasons.
Q16Discontinuing operations definition and application under AS
0 marks easy
Arzoo Ltd. is in the business of manufacture of Passenger cars and commercial vehicles. The company is working on a strategic plan to shift from the Passenger car segment over the coming 5 years. However, no specific plans have been drawn up for sale of the division nor its assets. As part of its plan it will reduce the production of passenger cars by 20% annually. It also plans to commence another new factory for the manufacture of commercial vehicles plus transfer of employees in a phased manner.
Q17Cash-generating unit identification, impairment testing unde
0 marks easy
A publisher owns 150 magazine titles of which 70 were purchased and 80 were self-created. The price paid for a purchased magazine title is recognised as an intangible asset. The costs of creating magazine titles and maintaining existing titles are recognised as an expense when incurred. Cash inflows from direct sales and advertising are identifiable for each magazine title. Titles are managed by customer segments. The level of advertising income for a magazine title depends on the range of titles in the customer segment. Management has a policy to abandon old titles before the end of their economic lives and replace them immediately with new titles for the same customer segment. Whether it will be a cash-generating unit as per AS 28?
Q18Provisions for contingencies, recognition criteria under AS
0 marks easy
A company incorporated under Section 8 of the Companies Act, 2013, have main objective to promote the trade by organizing trade fairs / exhibitions. When organizing trade fairs and exhibitions, the company decided to charge 5% contingency charges for the participants/outside agencies on income received, while for fairs organized by outside agencies, 5% contingency charges are levied separately in the invoice. For fairs organized by the company itself, these charges are inbuilt in the space rent charged from participants. Both are credited to Income and Expenditure Account. The intention of levying these charges is to meet any unforeseen liability in future such as injury/loss of life to visitors/exhibitors due to fire, terrorist attack, stampede, natural calamities and other public and third party liability. The chances of occurrence are high because of large crowds. The decision was based on assessment only as actual liability cannot be estimated. The company treated 5% contingency charges as income and made matching provision, with suitable disclosure. Required
Q19Share buyback, journal entries, capital reorganization
0 marks easy
Purpose Ltd. resolves to buy back 4 lakhs of its fully paid equity shares of ₹ 10 each at ₹ 22 per share. This buyback is in compliance with the provisions of the Companies Act and does not exceed 25% of Company's paid up capital in the financial year. For the purpose, it issues 1 lakh 11% preference shares of ₹ 10 each at par, the entire amount being payable with applications. The company uses ₹ 16 lakhs of its balance in Securities Premium Account apart from its adequate balance in General Reserve to fulfill the legal requirements regarding buy-back. Give necessary journal entries to record the above transactions.
Q20Branch accounting, branch account preparation
0 marks easy
From the following particulars relating to Pune branch for the year ending December 31, 2024, prepare Branch Account in the books of Head office. Opening: Stock ₹ 10,000, Debtors ₹ 4,000, Petty cash ₹ 500, Furniture ₹ 2,000, Prepaid fire insurance ₹ 150, Salaries outstanding ₹ 100. Transactions: Goods sent to Branch ₹ 80,000, Cash Sales ₹ 1,30,000, Credit Sales ₹ 40,000, Cash received from debtors ₹ 35,000, Cash paid by debtors directly to H.O. ₹ 2,000, Discount allowed ₹ 100. Expenses: Rent ₹ 2,000, Salaries ₹ 2,400, Petty Cash ₹ 1,000, Insurance ₹ 600 (total sent ₹ 6,000). Goods returned by Branch ₹ 1,000, Goods returned by debtors ₹ 2,000, Closing Stock ₹ 5,000, Petty Cash spent ₹ 850, Depreciation on furniture 10% p.a., Goods costing ₹ 1,200 destroyed by fire, Insurance Company paid ₹ 1,000, Closing Debtors ₹ 4,900.