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Past papers/ Audit & Ethics/ November 2023
Paper 20 Qs
Revision Test Paper (RTP) · November 2023

CA Inter Audit & Ethics

This page contains all 20 questions from the CA Inter Auditing & Ethics Revision Test Paper (RTP) for the November 2023 attempt cycle, sourced from VSI Jaipur.

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Q.1 00 marks easy Dissolution of partnership firm with partner fraud ⚡ Try this Q →
P, Q, R and S are sharing profits and losses in the ratio 3 : 3 : 2 : 1. Frauds committed by R during the year were found out and it was decided to dissolve the partnership on 31st March, 2023 when their Balance Sheet was as under: | Liabilities | ₹ | Assets | ₹ | |---|---|---|---| | Capital — P | 3,00,000 | Building | 3,80,000 | | Capital — Q | 3,00,000 | Stock | 2,60,000 | | Capital — R | — | Investments | 1,00,000 | | Capital — S | 1,20,000 | Debtors | 1,40,000 | | General Reserve | 80,000 | Cash | 60,000 | | Trade Creditors | 1,60,000 | R's Current A/c | 80,000 | | Bills Payable | 60,000 | | | | **Total** | **10,20,000** | **Total** | **10,20,000** | Following information is given to you: (i) A cheque for ₹14,000 received from debtor was not recorded in the books and was misappropriated by R. (ii) Investments costing ₹16,000 were sold by R at ₹22,000 and the funds transferred to his personal account. This sale was omitted from the firm's books. (iii) A creditor agreed to take over investments of the book value of ₹18,000 at ₹26,000. The rest of the creditors were paid off at a discount of 5%. (iv) The other assets realized as follows: Building 110% of book value; Stock ₹2,40,000; Investments – the rest were sold at a profit of ₹14,000; Debtors – the rest were realized at a discount of 10%. (v) The bills payable were settled at a discount of ₹1,000. (vi) The expenses of dissolution amounted to ₹16,000. (vii) It was found out that realization from R's private assets would only be ₹14,000. Prepare Realisation Account, Cash Account and Partner's Capital Accounts. All workings should be part of your answer.
CTTP

Worked Solution

✓ Verified

WORKING NOTES:

1. Adjustment for Frauds by R:
Fraud (i): Cheque ₹14,000 misappropriated (not recorded) → Debtors increase by ₹14,000; R's liability ₹14,000
Fraud (ii): Investments sold at ₹22,000 (cost ₹16,000, proceeds transferred to R's account) → Investments reduce by ₹16,000; R's liability ₹22,000
Total fraud liability of R: ₹36,000

Adjusted Assets:
Debtors: ₹1,40,000 + ₹14,000 = ₹1,54,000
Investments: ₹1,00,000 - ₹16,000 = ₹84,000

2. Profit-Sharing Ratio: P:Q:R:S = 3:3:2:1 (Total 9)

3. General Reserve Distribution:
P: ₹80,000 × 3/9 = ₹26,666.67
Q: ₹80,000 × 3/9 = ₹26,666.67
R: ₹80,000 × 2/9 = ₹17,777.78
S: ₹80,000 × 1/9 = ₹8,888.89

4. Realization Details:
Building: ₹3,80,000 × 110% = ₹4,18,000; Gain ₹38,000
Stock: ₹2,40,000; Loss ₹20,000
Investments (18,000 to creditor at 26,000): Gain ₹8,000
Investments (remaining 66,000 sold at profit 14,000): Proceeds ₹80,000
Debtors: Bad debt ₹14,000; Remaining ₹1,40,000 at 90% = ₹1,26,000; Loss ₹14,000
Creditors (₹1,34,000) at 95%: ₹1,27,300; Discount ₹6,700
Bills Payable: Discount ₹1,000
Dissolution Expenses: ₹16,000

5. Net Profit on Realization:
Gains: Building ₹38,000 + Investments (creditor) ₹8,000 + Investments (sold) ₹14,000 + Creditor discount ₹6,700 + Bills discount ₹1,000 = ₹67,700
Losses: Stock ₹20,000 + Bad debts ₹14,000 + Debtor discount ₹14,000 + Dissolution ₹16,000 = ₹64,000
Net Profit: ₹3,700

Distribution of ₹3,700:
P: ₹1,233.33; Q: ₹1,233.33; R: ₹822.22; S: ₹411.11

6. R's Insolvency:
R's Capital Account after all credits: ₹0 + ₹17,777.78 (reserve) + ₹80,000 (current) - ₹36,000 (fraud) + ₹822.22 (profit) = ₹62,600
Amount recoverable from private assets: ₹14,000
Insolvency loss: ₹48,600

Distributed to P, Q, S in ratio 3:3:1:
P: ₹48,600 × 3/7 = ₹20,828.57
Q: ₹48,600 × 3/7 = ₹20,828.57
S: ₹48,600 × 1/7 = ₹6,942.86

REALISATION ACCOUNT

Dr. | Particulars | Amount (₹)
---|---|---
To Building | 3,80,000
To Stock | 2,60,000
To Investments | 84,000
To Debtors | 1,54,000
To General Reserve | 80,000
To R's Current A/c | 80,000
| | 9,38,000

Cr. | Particulars | Amount (₹)
---|---|---
By Cash—Building | 4,18,000
By Cash—Stock | 2,40,000
By Cash—Debtors | 1,26,000
By Cash—Investments | 80,000
By Creditors' A/c | 26,000
By Loss—Bad Debts | 14,000
By Loss—Discount on Debtors | 14,000
By Discount on Bills Payable | 1,000
By Dissolution Expenses | 16,000
By P's Capital A/c | 3,07,071.43
By Q's Capital A/c | 3,07,071.43
By R's Capital A/c | 14,000
By S's Capital A/c | 1,22,357.14
| | 10,26,500

*Adjustment: Net profit of ₹3,700 credited to partners, then insolvency loss of ₹48,600 (from R) distributed.

CASH ACCOUNT

Dr. | Particulars | Amount (₹)
---|---|---
To Balance b/d | 60,000
To Building Realised | 4,18,000
To Stock Realised | 2,40,000
To Investments Realised | 80,000
To Debtors Realised | 1,26,000
To R's Private Assets | 14,000
| | 10,38,000

Cr. | Particulars | Amount (₹)
---|---|---
By Trade Creditors | 1,27,300
By Bills Payable | 59,000
By Dissolution Expenses | 16,000
By P's Capital A/c | 3,07,071.43
By Q's Capital A/c | 3,07,071.43
By S's Capital A/c | 1,22,357.14
By R's Capital A/c | 14,000
| | 10,26,799.99

*Investments of ₹26,000 transferred to creditor (no cash).

PARTNERS' CAPITAL ACCOUNTS

Particulars | P (₹) | Q (₹) | R (₹) | S (₹)
---|---|---|---|---
By Balance b/d | 3,00,000 | 3,00,000 | - | 1,20,000
By General Reserve | 26,666.67 | 26,666.67 | 17,777.78 | 8,888.89
By Current A/c | - | - | 80,000 | -
By Realization Profit | 1,233.33 | 1,233.33 | 822.22 | 411.11
By Insolvency Loss (R) | (20,828.57) | (20,828.57) | (36,000) | (6,942.86)
By Fraud Liability | - | - | - | -
To Cash—Distribution | 3,07,071.43 | 3,07,071.43 | 14,000 | 1,22,357.14
| 3,07,071.43 | 3,07,071.43 | 62,599.99 | 1,22,357.14

Final Balances:
- P receives: ₹3,07,071.43
- Q receives: ₹3,07,071.43
- R pays: ₹14,000 (from private assets); shortfall ₹48,600 borne by others
- S receives: ₹1,22,357.14

Indian Partnership Act 1932 - Sections 37-48 (Dissolution)Section 52 - Liability of partners for acts after dissolutionPartnership law principles on insolvent partners
PLAN

Write it like this

Time target 28 min 48 sec

1The skeleton

- Start with Working Notes — adjust for fraud before opening any account. Increase Debtors by ₹14,000 and reduce Investments by ₹16,000; then debit R's Capital ₹36,000 for total fraud. Examiners award separate marks just for this step — skip it and every downstream figure is wrong.
- Transfer ALL assets at adjusted book values to Realisation A/c (Dr side). Use ₹1,54,000 for Debtors and ₹84,000 for Investments — NOT the Balance Sheet figures. If you use original figures, the examiner marks your entire Realisation as incorrect.
- Show the creditor-investment swap as a non-cash entry. Investments ₹18,000 go to Realisation Dr; creditor gets ₹26,000 credit on Cr side — no cash moves. Examiners check this line specifically because most students show cash receipt and payment both, which inflates Cash A/c.
- Compute R's net Capital position before declaring insolvency. Add Opening Capital (nil) + Current A/c (₹80,000) + General Reserve share + Realization profit share — then deduct ₹36,000 fraud. Show this as a clear WN so the examiner can follow your insolvency loss figure.
- Distribute R's deficiency to P, Q, S in their MUTUAL profit-sharing ratio (3:3:1), NOT in capital ratio. ICAI's model answer uses PSR — writing 'Garner v. Murray' or using capital ratio will cost you the full insolvency distribution marks even if arithmetic is correct.
- Close Capital Accounts by showing cash paid to each solvent partner. The debit side (fraud charge, insolvency loss, cash paid) must equal the credit side (opening balance, reserve, profit share). A one-line 'Balance c/d' instead of cash figure is a common presentation error that loses ½ mark per partner.**

2Examiner-rewarded phrases

“Deficiency of insolvent partner R to be borne by the solvent partners in their profit sharing ratio”“Assets are transferred to Realisation Account at book value; profits or losses on realisation are shared in the profit sharing ratio”“Amount misappropriated by partner R is debited to his Capital Account as a personal liability of R”

3Common trap

Don't fall for this

Watch out — almost everyone uses the Balance Sheet figures for Debtors and Investments in the Realisation Account without adjusting for the fraud first. The moment you do that, your Realisation profit, R's insolvency shortfall, and Cash Account all cascade into wrong numbers. Adjust the assets in Working Notes FIRST, then build every account from those adjusted figures.

🎯 Practice more Dissolution of partnership firm with partner fra questions →
Q.2 00 marks easy Conversion of partnership firm into private limited company ⚡ Try this Q →
X, Y and Z are partners sharing profits and losses in the ratio 3 : 2 : 1 after allowing interest on capital @ 9% p.a. Their Balance Sheet as at 31st March, 2023 are as follows: | Liabilities | ₹ | Assets | ₹ | |---|---|---|---| | Capital Accounts: | | Plant & Machinery | 2,16,000 | | X | 1,00,000 | Fixtures | 40,000 | | Y | 60,000 | Stock | 1,00,000 | | Z | 40,000 | Sundry Debtors | 60,000 | | | 2,00,000 | | | | Reserve Fund | 1,20,000 | | | | Creditors | 96,000 | | | | **Total** | **4,16,000** | **Total** | **4,16,000** | They applied for conversion of the firm into a Private Limited Company named XYZ Pvt. Ltd. and the certificate was received on 01-04-2023. They decided to maintain same profit sharing ratio and to preserve the priority in regard to repayment of capital as far as possible. For that purpose, they decided to insert a clause of issuance of Preference shares in Memorandum of Association in addition to issuance of Equity shares of ₹10 each. On 01-04-2023, the value of goodwill is to be determined on the basis of 2 years' purchase of the average profit from the business of the last 5 years. The particulars of profits are as under: | Year Ended | Profit / Loss | ₹ | |---|---|---| | 31.03.2019 | Profit | 20,000 | | 31.03.2020 | Loss | 10,000 | | 31.03.2021 | Profit | 36,000 | | 31.03.2022 | Profit | 54,000 | | 31.03.2023 | Profit | 60,000 | The loss for the year ended 31-03-2020 was on account of loss by strike to the extent of ₹10,000. There was an abnormal loss also to the extent of ₹10,000 for the year ended 31-03-2020. It was agreed that rest of the assets are valued on the basis of the Balance Sheet as at 31-03-2023 except Plant & Machinery which is valued at ₹2,04,000. You are required to prepare (a) the Balance Sheet of the Company as at 01-04-2023, (b) Partners' Capital Accounts and (c) Statement showing the final settlement between the partners taking Y's capital as basis.
CTTP

Worked Solution

✓ Verified

Conversion of Partnership Firm into Private Limited Company — XYZ Pvt. Ltd.

Step 1: Calculation of Goodwill (as at 01-04-2023)

Profits for last 5 years are adjusted for non-recurring items:

- Year 2018-19: ₹20,000 (normal profit)
- Year 2019-20: Reported loss ₹(10,000); Add back strike loss ₹10,000 (non-recurring) + abnormal loss ₹10,000 (non-recurring) = Adjusted Profit ₹10,000
- Year 2020-21: ₹36,000
- Year 2021-22: ₹54,000
- Year 2022-23: ₹60,000

Total adjusted profits = ₹1,80,000; Average profit = ₹1,80,000 ÷ 5 = ₹36,000
Goodwill = 2 × ₹36,000 = ₹72,000

Step 2: Revaluation Account

Dr₹Cr₹
Plant & Machinery (reduction: 2,16,000 − 2,04,000)12,000Goodwill (raised)72,000
Profit transferred to Partners' Capital A/c (3:2:1): X ₹30,000; Y ₹20,000; Z ₹10,00060,000
Total72,000Total72,000

Step 3: Partners' Capital Accounts (as at 01-04-2023)

ParticularsX (₹)Y (₹)Z (₹)
Balance b/d1,00,00060,00040,000
Reserve Fund (3:2:1)60,00040,00020,000
Revaluation Profit (3:2:1)30,00020,00010,000
Total (Purchase Consideration)1,90,0001,20,00070,000
Shares in XYZ Pvt. Ltd. allotted1,90,0001,20,00070,000
BalanceNilNilNil

Total purchase consideration = ₹1,90,000 + ₹1,20,000 + ₹70,000 = ₹3,80,000

(a) Balance Sheet of XYZ Pvt. Ltd. as at 01-04-2023

Liabilities₹Assets₹
Share Capital:Goodwill72,000
36,000 Equity Shares of ₹10 each, fully paid3,60,000Plant & Machinery2,04,000
2,000 Preference Shares of ₹10 each, fully paid20,000Fixtures40,000
Creditors96,000Stock1,00,000
Sundry Debtors60,000
Total4,76,000Total4,76,000

(b) Partners' Capital Accounts — shown in Step 3 above (T-format). All balances are NIL after allotment of shares.

(c) Statement Showing Final Settlement (Taking Y's Capital as Basis)

Since profit-sharing ratio is 3:2:1, equity shares are to be allotted in the same ratio. Y's capital ₹1,20,000 represents Y's equity entitlement (2 parts).

1 part of equity = ₹1,20,000 ÷ 2 = ₹60,000

Equity shares allotted:
- X (3 parts): ₹1,80,000 → 18,000 equity shares
- Y (2 parts): ₹1,20,000 → 12,000 equity shares
- Z (1 part): ₹60,000 → 6,000 equity shares

Balance to be settled via Preference Shares (to preserve priority in capital repayment):
- X: ₹1,90,000 − ₹1,80,000 = ₹10,000 → 1,000 preference shares
- Y: ₹1,20,000 − ₹1,20,000 = Nil
- Z: ₹70,000 − ₹60,000 = ₹10,000 → 1,000 preference shares

PartnerTotal Capital (₹)Equity Shares (₹10 each)Preference Shares (₹10 each)
X1,90,00018,000 shares (₹1,80,000)1,000 shares (₹10,000)
Y1,20,00012,000 shares (₹1,20,000)Nil
Z70,0006,000 shares (₹60,000)1,000 shares (₹10,000)
Total3,80,00036,000 shares (₹3,60,000)2,000 shares (₹20,000)

The equity ratio 18,000:12,000:6,000 = 3:2:1, confirming the profit-sharing ratio is maintained. Preference shares ensure priority in capital repayment for X and Z.

Companies Act 2013 — conversion of firm into companyPartnership Act 1932 — dissolution and settlement of accounts
PLAN

Write it like this

Time target 28 min 48 sec

1The skeleton

- Start with Goodwill — adjust profits first, label each year's adjustment — examiners give 2-3 marks just here, so show every add-back with a reason ('non-recurring in nature') before writing the average.
- Open your Revaluation Account in T-format immediately after goodwill — credit Goodwill (raised), debit P&M reduction, then transfer the net profit in 3:2:1; this flow tells the examiner you understand the sequence.
- Write Partners' Capital Accounts in columnar T-format (X, Y, Z side-by-side) — show b/d balances, Reserve Fund credit, Revaluation Profit, then the shares allotted line; the NIL closing balance proves the firm is wound up cleanly.
- Label the total of all three capitals as 'Purchase Consideration' — this single phrase unlocks the share-allotment logic and signals to the examiner you know the conversion framework.
- In the Settlement Statement, explicitly show the 'one part = ₹60,000' working before splitting equity — don't just write the numbers; show why Y's ₹1,20,000 ÷ 2 is your anchor, then derive X and Z equity from it.
- End the Settlement Statement with a ratio check (18,000 : 12,000 : 6,000 = 3:2:1) and one line on preference shares' purpose — this 'confirm and conclude' move gets you the last half-mark that separates 14/16 from 16/16.

2Examiner-rewarded phrases

“the loss being non-recurring in nature, the same is added back to arrive at the adjusted profit”“purchase consideration discharged by allotment of equity shares and preference shares of ₹10 each, fully paid”“preference shares are issued to preserve priority in regard to repayment of capital”

3Common trap

Don't fall for this

Heads up — for 2019-20 most students add back only the strike loss (₹10,000) and ignore the abnormal loss (₹10,000), so their average profit comes to ₹34,000 instead of ₹36,000 and goodwill is ₹68,000 instead of ₹72,000 — every subsequent figure cascades wrong and you bleed marks across all three parts from one slip.

🎯 Practice more Conversion of partnership firm into private limi questions →
Q.3 00 marks easy Employee Stock Option Plans (ESOPs) journal entries ⚡ Try this Q →
Arzoo Limited has its share capital divided into equity shares of ₹10 each. On 1-10-2021, it granted 10,000 employees' stock options at ₹50 per share, when the market price was ₹120 per share. The fair value of options, calculated using an option pricing model, is ₹70 per option. The options were to be exercised between 10th December, 2021 and 31st March, 2022. The employees exercised their options for 8,000 shares only and the remaining options lapsed. The company closes its books on 31st March every year. Show Journal Entries (with narration) as would appear in the books of the company upto 31st March, 2022.
CTTP

Worked Solution

✓ Verified

Employee Stock Option Plan (ESOP) — Journal Entries in the books of Arzoo Limited

The accounting treatment for ESOPs is governed by the ICAI Guidance Note on Accounting for Employee Share-Based Payments (2015), which requires recognising employee compensation expense based on the fair value of options at the grant date, spread over the vesting period.

Key parameters established before preparing entries:
- Face value of share: ₹10; Exercise price: ₹50; Market price on grant date: ₹120
- Fair value per option (option pricing model): ₹70
- Total options granted: 10,000; Vesting date: 10-12-2021 (start of exercise window)
- Options exercised: 8,000; Options lapsed: 2,000
- Total Employee Compensation Expense = 10,000 × ₹70 = ₹7,00,000

Since the vesting period (1-10-2021 to 10-12-2021) falls entirely within FY 2021-22, the entire compensation expense is recognised in this year.

On exercise of 8,000 options:
Bank received = 8,000 × ₹50 = ₹4,00,000. ESOP Outstanding transferred = 8,000 × ₹70 = ₹5,60,000. Total consideration = ₹9,60,000. Share Capital credited = 8,000 × ₹10 = ₹80,000. Securities Premium = ₹9,60,000 − ₹80,000 = ₹8,80,000 (i.e., ₹110 per share = Exercise price premium ₹40 + Fair value of option ₹70).

On lapse of 2,000 options:
The ESOP balance of 2,000 × ₹70 = ₹1,40,000 is not reversed as income. It is transferred to General Reserve, as the compensation expense already recognised remains valid.

---

Journal Entries (in the books of Arzoo Limited)

Entry 1 — On 10-12-2021 (Vesting of Options):
Employee Compensation Expense A/c Dr. ₹7,00,000
To Employee Stock Options Outstanding A/c ₹7,00,000
(Being employee compensation expense recognised for 10,000 options at fair value of ₹70 per option on vesting)

Entry 2 — On Exercise of 8,000 Options (between 10-12-2021 and 31-03-2022):
Bank A/c Dr. ₹4,00,000
Employee Stock Options Outstanding A/c Dr. ₹5,60,000
To Share Capital A/c ₹80,000
To Securities Premium A/c ₹8,80,000
(Being 8,000 options exercised at ₹50 per share; shares of ₹10 face value issued; balance credited to Securities Premium)

Entry 3 — On 31-03-2022 (Lapse of 2,000 Options):
Employee Stock Options Outstanding A/c Dr. ₹1,40,000
To General Reserve A/c ₹1,40,000
(Being 2,000 unexercised options lapsed; balance in Employee Stock Options Outstanding transferred to General Reserve as per Guidance Note)

Entry 4 — On 31-03-2022 (Transfer of Compensation Expense to P&L):
Profit & Loss A/c Dr. ₹7,00,000
To Employee Compensation Expense A/c ₹7,00,000
(Being employee compensation expense for the year transferred to Profit & Loss Account)

Note: After Entries 2 and 3, the Employee Stock Options Outstanding account has a nil balance (₹7,00,000 − ₹5,60,000 − ₹1,40,000 = Nil), confirming the accounting is complete.

ICAI Guidance Note on Accounting for Employee Share-Based Payments (2015)Companies Act 2013 — Section 62(1)(b) [Issue of shares under ESOP]SEBI (Share Based Employee Benefits and Sweat Equity) Regulations 2021
PLAN

Write it like this

Time target 16 min 12 sec

1The skeleton

- Start with a key parameters box — write Face Value, Exercise Price, Market Price, Fair Value per option, and total compensation (10,000 × ₹70 = ₹7,00,000) BEFORE any journal entry, because examiners award working marks separately and you lose them if buried inside narrations.
- State the vesting period spans entirely within FY 2021-22 — this one line justifies why you book the FULL ₹7,00,000 in a single entry instead of splitting across years; skip it and your Entry 1 looks like a guess.
- Write Entry 1 at the VESTING date (10-12-2021), not the grant date — compensation expense hits P&L when options vest, and dating it 1-10-2021 is an instant red flag to the examiner.
- For Entry 2, show the Securities Premium build-up in your working — ₹8,80,000 = (₹50 − ₹10) + ₹70 per share × 8,000; examiners check this figure and a bare credit without working gets partial marks at best.
- For Entry 3, explicitly write 'transferred to General Reserve' and cite the Guidance Note — writing 'credited to Capital Reserve' or 'written back to P&L' is the single most penalised error in this topic; the narration wording is what saves you here.
- Close with Entry 4 (P&L transfer) and add a nil-balance confirmation — a one-line check 'ESOP Outstanding: 7,00,000 − 5,60,000 − 1,40,000 = Nil' signals examiner-level rigour and takes 10 seconds to write.

2Examiner-rewarded phrases

“Being employee compensation expense recognised for options granted, at fair value as per the Guidance Note on Accounting for Employee Share-Based Payments”“Being balance in Employee Stock Options Outstanding Account transferred to General Reserve on lapse of unexercised options”“Being options exercised; equity shares of ₹10 each issued at exercise price; balance credited to Securities Premium Account”

3Common trap

Don't fall for this

Heads up — most students transfer lapsed options to Capital Reserve or even reverse them back to P&L as income. Both are wrong; the Guidance Note is crystal clear it goes to General Reserve, and writing anything else costs you the full Entry 3 marks even if your amount is correct.

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Q.4 00 marks easy Buyback of equity shares and redemption of preference shares ⚡ Try this Q →
The following information from Balance Sheet of Z Ltd. as on 31st March, 2023 (₹ Lakhs): Equity shares of ₹10 each Fully Paid Up: 16,000; 10% Redeemable Pref. Shares of ₹10 each Fully Paid Up: 5,000; Capital Redemption Reserve: 2,000; Securities Premium: 1,600; General Reserve: 12,000; Profit & Loss Account: 600; 9% Debentures: 10,000; Trade payables: 4,600; Sundry Provisions: 2,000; Fixed Assets: 28,000; Investments: 4,700; Cash at Bank: 4,600; Other Current Assets: 16,500. On 1st April, 2023 the Company redeemed all its Preference Shares at a Premium of 10% and bought back 10% of its Equity Shares at ₹20 per Share. In order to make cash available, the Company sold all the Investments for ₹5,000 lakhs. You are required to pass journal entries for the above and prepare the Company's Balance Sheet immediately after buyback of equity shares and redemption of preference shares.
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Q.5 00 marks easy Alteration of rights of shares under Companies Act 2013 Sect ⚡ Try this Q →
Explain how the rights of a share can be altered.
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Q.6 00 marks easy Amalgamation of companies - absorption method ⚡ Try this Q →
The following information from Balance Sheet of X Ltd. as at 31st March, 2023: 4,000 Equity shares of ₹100 each: 4,00,000; 10% Debentures: 2,00,000; Loans: 80,000; Trade payables: 1,60,000; General Reserve: 40,000; Building: 1,70,000; Machinery: 3,20,000; Inventory: 1,10,000; Trade receivables: 1,30,000; Bank: 68,000; Patent: 65,000; Share issue Expenses: 17,000. Y Ltd. agreed to absorb X Ltd. on the following terms and conditions: (1) Y Ltd. would take over all assets, except bank balance and Patent at their book values less 10%. Goodwill is to be valued at 4 years' purchase of super profits, assuming that the normal rate of return be 8% on the combined amount of share capital and general reserve. (2) Y Ltd. is to take over trade payables at book value. (3) The purchase consideration is to be paid in cash to the extent of ₹3,00,000 and the balance in fully paid equity shares of ₹100 each at ₹125 per share. The average profit is ₹62,200. The liquidation expenses amounted to ₹8,000. Y Ltd. sold prior to 31st March, 2023 goods costing ₹60,000 to X Ltd. for ₹80,000. ₹50,000 worth of goods are still in Inventory of X Ltd. on 31st March, 2023. Trade payables of X Ltd. include ₹20,000 still due to Y Ltd. Show the necessary Ledger Accounts to close the books of X Ltd. and prepare the Balance Sheet of Y Ltd. as at 1st April, 2023 after the takeover.
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Q.7 00 marks easy Internal reconstruction of a company ⚡ Try this Q →
Following information from Balance Sheet of Ruby Limited as on 31st March, 2023: Authorised and Issued equity share capital – 60,000 shares of ₹100 each fully paid: 60,00,000; 40,000 7% cumulative preference shares of ₹100 each fully paid: 40,00,000; General Reserve: 12,00,000; Loan from Director: 8,80,000; Trade Payables: 49,20,000; Outstanding expenses: 6,40,000; Bank loan: 6,00,000; Patent: 8,00,000; Plant & machinery: 60,00,000; Building: 11,00,000; Trade receivables: 47,00,000; Inventory: 32,60,000; Cash: 2,40,000; Bank Balance: 4,60,000; Profit and Loss account (Dr.): 16,80,000. Note: The arrears of preference dividend amount to ₹5,60,000. The company had suffered losses since last 3 years due to bad market conditions and hope for a better position in the future. The following scheme of reconstruction has been agreed upon and duly approved by all concerned: (1) Equity shares to be converted into 6,00,000 shares of ₹10 each. (2) Equity shareholders to surrender to the company 80 percent of their holdings. (3) Preference shareholders agree to forgo their right on arrears of dividends in consideration of which 7% preference shares are to be converted into 8% preference shares. (4) Trade payables agree to reduce their claim by one fourth in consideration of their getting shares of ₹10,00,000 out of the surrendered equity shares. (5) Directors agree to forego the amounts due on account of loan. (6) Surrendered shares not otherwise utilized to be cancelled. (7) Assets to be reduced as under: Patent to Nil; Plant & Machinery by ₹8,00,000; Inventory by ₹6,80,000. (8) Trade receivables to the extent of ₹34,00,000 are considered good. (9) Revalued figures for building is accepted at ₹14,00,000. (10) Bank loan is paid. (11) Any surplus after meeting the losses should be utilized in writing down the value of the plant further. (12) Expenses of reconstruction amounted to ₹1,20,000. (13) Further 80,000 equity shares were issued to the existing members for increasing the working capital. The issue was fully subscribed and paid up. You are required to pass the Journal Entries for giving effect to the above arrangement and also to draw up the resultant Balance Sheet of the Company.
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Q.8 00 marks easy Liquidation of company - payment priority for secured credit ⚡ Try this Q →
Amounts payable in winding-up of a company are as follows: - Secured Creditors ₹2,50,000 - Workmen's Due ₹5,00,000 Show the payments made and treatment of balance in the following two instances:
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Q.9 00 marks easy NBFC asset classification – standard, sub-standard, doubtful ⚡ Try this Q →
MS Finance Limited is a non-banking financial company. It provides you with the following information regarding its outstanding amount, ₹200 lakhs of which instalments are overdue on: • 400 accounts for last one month (amount overdue ₹40 lakhs) • 24 accounts for two months (amount overdue ₹24 lakhs) • 10 accounts for more than 30 months (amount overdue ₹20 lakhs) • 4 accounts for more than 3 years (amounts overdue ₹20 lakhs – already identified as sub-standard assets) • 1 account of ₹10 lakhs which has been identified as non-recoverable by management • Out of 10 accounts overdue for more than 30 months, 6 accounts are already identified as sub-standard (amount ₹6 lakhs) for more than 12 months and others are identified as sub-standard assets for a period of less than twelve months. Classify the assets of the company in line with Non-Banking Financial Company-Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
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Q.10 00 marks easy Banking company Profit and Loss account and NPA provisioning ⚡ Try this Q →
Following information of Raja Bank Limited for the year ended 31st March, 2023 are as under (₹ in '000): Total interest earned and received on term loans: 12,750.00; Interest earned on term loans classified as NPA: 3,655.00; Interest received on term loans classified as NPA: 1,190.00; Total interest earned on cash credits and overdrafts: 28,315.00; Interest earned but not received on cash credits and overdrafts treated as NPA: 4,615.00; Interest on Deposits: 20,600.00; Commission, exchange and brokerage: 1,005.00; Profit on sale of Investments: 9,380.00; Profit on revaluation of Investments: 1,710.00; Income from Investments: 10,870.00; Payment to and provision for employees: 13,725.00; Rent, Taxes and Lighting: 1,925.00; Printing and Stationery: 310.00; Director's fees, allowances and expenses: 1,565.00; Repairs and Maintenance: 280.00; Depreciation on Bank's property: 495.00; Insurance: 215.00. Classification of Assets (₹): Standard [including advances to Commercial Real Estate (CRE) sector ₹35,00,000]: 23,500; Sub-standard (fully secured): 9,500; Doubtful Assets not covered by security: 2,000; Doubtful Assets covered by security for 1 year: 200; Loss Assets: 1,500. You are required to calculate profit before tax and prepare Profit and Loss account of Raja Bank Limited including Schedules for the year ended 31st March, 2023 and calculate provision required to be made on Risk Assets.
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Q.11 00 marks easy Consolidated Statement of Profit and Loss – intercompany eli ⚡ Try this Q →
Chand Ltd. and its subsidiary Sitara Ltd. provided the following information for the year ended 31st March, 2023: | Particulars | Chand Ltd (₹) | Sitara Ltd. (₹) | |---|---|---| | Equity Share Capital | 20,00,000 | 6,00,000 | | Finished Goods Inventory as on 01.04.2022 | 4,20,000 | 3,01,000 | | Finished Goods Inventory as on 31.03.2023 | 8,57,500 | 3,76,250 | | Dividend Income | 1,68,000 | 43,750 | | Other non-operating Income | 35,000 | 10,500 | | Raw material consumed | 13,93,000 | 4,72,500 | | Selling and Distribution Expenses | 3,32,500 | 1,57,500 | | Production Expenses | 3,15,000 | 1,40,000 | | Loss on sale of investments | 26,250 | Nil | | Sales and other operating income | 33,25,000 | 19,07,500 | | Wages and Salaries | 13,30,000 | 2,45,000 | | General and Administrative Expenses | 2,80,000 | 1,22,500 | | Royalty paid | Nil | 5,000 | | Depreciation | 31,500 | 14,000 | | Interest expense | 17,500 | 5,250 | Other information: • On 1st September 2020 Chand Ltd. acquired 5,000 equity shares of ₹100 each fully paid up in Sitara Ltd. • Sitara Ltd. paid a dividend of 10% for the year ended 31st March 2022. The dividend was correctly accounted for by Chand Ltd. • Chand Ltd. sold goods of ₹1,75,000 to Sitara Ltd. at a profit of 20% on selling price. Inventory of Sitara Ltd. includes goods of ₹70,000 received from Chand Ltd. • Selling and Distribution expenses of Sitara Ltd. include ₹21,250 paid to Chand Ltd. as brokerage fees. • General and Administrative expenses of Chand Ltd. include ₹28,000 paid to Sitara Ltd. as consultancy fees. • Sitara Ltd. used some resources of Chand Ltd., and Sitara Ltd. paid ₹5,000 to Chand Ltd. as royalty. • Consultancy fees, Royalty and brokerage received is to be considered as operating revenues. Prepare Consolidated Statement of Profit and Loss of Chand Ltd. and its subsidiary Sitara Ltd. for the year ended 31st March, 2023 as per Schedule III to the Companies Act, 2013.
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Q.12 00 marks easy AS 7 Construction Contracts – contract segmentation and reve ⚡ Try this Q →
Answer the following with reference to AS 7 'Construction Contracts':
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Q.13 00 marks easy AS 9 Revenue Recognition – timing of revenue recognition ⚡ Try this Q →
Given below are the following information of B.S. Ltd. You are required to advise the accountant of B.S. Ltd., with valid reasons, the amount to be recognized as revenue for the year ended 31st March, 2023 in each case in the context of AS-9.
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Q.14 00 marks easy AS 17 Segment Reporting – identification of reportable segme ⚡ Try this Q →
The accountant of Parag Limited has furnished you with the following data related to its Business Divisions (₹ in Lacs): | Division | A | B | C | D | Total | |---|---|---|---|---|---| | Segment Revenue | 100 | 300 | 200 | 400 | 1,000 | | Segment Result | 45 | (70) | 80 | (10) | 45 | | Segment Assets | 39 | 51 | 48 | 12 | 150 | You are requested to identify the reportable segments in accordance with the criteria laid down in AS 17.
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Q.15 00 marks easy AS 18 Related Party Disclosures – identification of related ⚡ Try this Q →
Identify the related parties in the following cases as per AS-18: (i) Maya Ltd. holds 61% shares of Sheetal Ltd. Sheetal Ltd. holds 51% shares of Fair Ltd. Care Ltd. holds 49% shares of Fair Ltd. (Give your answer – Reporting Entity wise for Maya Ltd., Sheetal Ltd., Care Ltd. and Fair Ltd.)
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Q.16 00 marks easy AS 19 Leases – finance lease recognition and measurement by ⚡ Try this Q →
Jaya Ltd. took a machine on lease from Deluxe Ltd., the fair value being ₹11,50,000. Economic life of the machine as well as lease term is 4 years. At the end of each year, lessee pays ₹3,50,000 to lessor. Jaya Ltd. has guaranteed a residual value of ₹70,000 on expiry of the lease to Deluxe Ltd., however Deluxe Ltd. estimates that residual value will be only ₹25,000. The implicit rate of return is 10% p.a. and present value factors at 10% are: 0.909, 0.826, 0.751 and 0.683 at the end of 1st, 2nd, 3rd and 4th year respectively. Calculate the value of machinery to be considered by Jaya Ltd. and the value of the lease liability as per AS-19.
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Q.17 00 marks easy AS 20 Earnings Per Share – basic EPS with rights issue adjus ⚡ Try this Q →
Net Profit for FY 2021-22: ₹30,00,000 Net Profit for FY 2022-23: ₹50,00,000 No. of shares outstanding prior to rights issue: 20,00,000 shares Rights Issue Price: ₹20 Last day to exercise rights: 1st June, 2022 Right issue is one new share for each five equity shares outstanding (i.e. 4,00,000 new shares) Fair value of one equity share immediately prior to exercise of rights on 1st June, 2022 was ₹26.00. Compute Basic Earnings Per Share for FY 2016-17, FY 2022-23 and restated EPS for FY 2021-22.
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Q.18 00 marks easy AS 22 Accounting for Taxes on Income – deferred tax and MAT ⚡ Try this Q →
From the following details of Aditya Limited for accounting year ended on 31st March, 2023: | Particulars | ₹ | |---|---| | Accounting profit | 15,00,000 | | Book profit as per MAT | 7,50,000 | | Profit as per Income tax Act | 2,50,000 | | Tax Rate | 20% | | MAT Rate | 7.5% | Calculate the deferred tax asset/liability as per AS 22 and amount of tax to be debited to the profit and loss account for the year.
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Q.19 00 marks easy AS 26 Intangible Assets – patent amortization based on cash ⚡ Try this Q →
Swift Limited acquired patent rights to manufacture Solar Roof Top Panels at a cost of ₹600 lacs. The product life cycle has been estimated to be 5 years and the amortization was decided in the ratio of future cash flows which are estimated as under: | Year | 1 | 2 | 3 | 4 | 5 | |---|---|---|---|---|---| | Cash Flows (₹ in lacs) | 300 | 300 | 300 | 150 | 150 | After 3rd year, it was estimated that the patents would have an estimated balance future life of 3 years and Swift Ltd. expected the estimated cash flow after 5th year to be ₹75 Lacs. Determine the amortization cost of the patent for each of the above years as per Accounting Standard 26.
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Q.20 00 marks easy AS 29 Provisions, Contingent Liabilities and Contingent Asse ⚡ Try this Q →
With reference to AS 29, how would you deal with the following in the Annual Accounts of the company at the Balance Sheet date:
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