IPC Group-I Accounting Paper Nov 2014

IPC Group-I Accounting Paper Nov 2014

Time Allowed-3 hour                          Maximum Marks-100

Question No.1 is Compulsory

1. (a) In the books of Optic Fiber Ltd., plant and machinery stood at Rs 6,32,000 on 1.4.2013. However  on scrutiny it was found that machinery worth Rs 1,20,000 was included in the purchases on 1.6.2013. On 30.6.2013 the company disposed a machine having book value of Rs 1,89,000 on 1.4.2013 at Rs 1,75,000 in part exchange of a new machine costing Rs 2,56,000. The company charges depreciation @ 20% WDV on plant and machinery.

You are required to calculate :

(i) Depreciation to be charged to P/L

       (ii) Book value of plant and machinery A/c as on 31.3.2014

       (iii) Loss on exchange of machinery.

    (b) Sarita Publications Publishers a monthly magazine on the 15th of every month. It sells advertising space in the magazine to advertisers on the terms of 80% salve value payable in advance and the balance within 30 days of the release of the puplication. The sale of space for the March 2014 issue was made in Feburary 2014. The magazine was Published on its schedule date. It recevied Rs 2,40,000 on 10.3.2014 and Rs 60,000 on 10.4.2014 for the March 2014 issue.

Discuss in the context of AS 9 the amount of revenue to be recognized and the treatment of the amount received from advetisers for the year ending 31.3.2014. What will be the treatment if the publication is delayed till 2.4.2014 ?

    (c) Capital Cables Ltd., has a normal wastage of 4% in the production process. During the Year 2013-2014 the Company used 12,000 MT of raw material costing Rs 150 per MT.

At the end of the year 630 MT of wastage was in stock.The accountant wants to know how this wastage is to be treated in the books.

Explain in the context of AS 2 the treatment of normal loss and abnormal loss and also find out the amount o abnormal loss if any.

    (d) Blue-chip Equity investment Ltd., wants to re-classify its investment in accordance with AS 13.

(i) Long term investment in company A, costing Rs 8.5 lakhs are to be re-classified as current. The company had reduced the value of these investment to Rs 6.5 lakhs to recognize a permanent decline in value. The fair value on date of transfer is Rs 6.8 lakhs.

       (ii) Long term investment in Company B, costing Rs 7 lakhs are to be reclassified as current. The fair value on date of transfer is Rs 8 lakhs and book value is Rs 7 lakhs.

      (iii) Current investment in Company C, costing Rs 10 lakhs are to be re-classified as long term as the company wants to retain them. The market value on date of transfer is Rs 12 lakhs.

       (iv) Current investment in Company D, costing Rs 15 lakhs are to be re-classified as long term. The market value on date of transfer is Rs 14 lakhs.   

2.  The following information  relates to Country Sports Club for the year ended 31.3.2014. You are required to prepare the Receipts and Payments Account for the year ended 31.3.2014 and Balance sheets as on that date.

To Salaries

To Repairs and maintenance

To Group upkeep
                       To Electricity charges
                       To Sports material used

To printing and stationery

To Groundsman wages

To Depreciation

To Prize
 distributed(net of fund income)

To Surplus carried to capital fund









By Subscriptions

By Receipts for annual
    Sports    3,25,000

     Less : expenses for
      Sports  2,75,000

By Entrance Fees

By Interest on 10% government bond

 By Rent on hire of club ground

By Profit on sale of sports material

By Sale of old news paper









     Additional information :

    (a)    Balance as on 1.4.2013(Rs)         Balance as on 31.3.2014(Rs)

Fixed assets(net block)    6,36,000                                 7,20,000

Stock of sports material              1,24,000                          1,38,000

Investment in 10% government bond      1,20,000              1,20,000

Subscription received in advance            64,000                      72,000

Outstanding subscription                     1,24,000                      88,000

Outstanding repairs expenses            13,500                        24,500

Creditors for sports material            78,600                           62,500

Salary paid in advance                 32,000                                    28,000

Prize fund                                2,40,000                                     2,40,000

Prize fund investment                 2,36,000                          2,36,000

Bank balance                   54,500                                                ?

     (b) During the year the club purchased sports material of Rs 1,80,000, out of which 75% was credit purchase.

     (c) 25% of the entrance fees is to be capitialized.

     (d) As per the Club's policy any excess of expenses for prizes distributed over prize fund income is to be charged to income and expenditure a/c and vice-versa :-
  Prie fund income earned during the year Rs 36,000

Prize distributed during the year Rs 40,000.

    (e) Interest on Government bond is received half yearly on 30th June and 31st December each year.

3. (a)  Prepare Cash flow for Gamma Ltd., for the year ending 31.3.2014 from the following information :

     (1) Sales for the year amounted to Rs 135 crores out of which 60% was cash sales.

(2) Purchases for the year amounted to Rs 55 crore out of which credit purchase was 80%.

(3) Administrative and selling expenses amounted to Rs 18 crores and salary paid amounted to Rs 22 crores.

(4) The Company redeemed debenture of Rs 20 crore at a premium of 10%. Debenture holders were issued equity shares of Rs 15 crores towards redemption and the balance was paid in cash. Debenture interest paid during the year was Rs 1.5 crores.

(5) Dividend paid during the year amounted to Rs 10 crores. Dividend distribution tax @ 17% was also paid.

(6) Investment costing Rs 12 crores were sold at a profit of Rs 2.4 crores.

(7) Rs 8 crores was paid towards income tax during the year.

(8) A new plant costing Rs 21 crores was purchased in part exchange of an old plant. The book value of the old plant was Rs 12 crores but the vendor took over the old plant at a value of Rs 10 crores only. The balance was paid in cash to the vendor.

(9) The following balance are also provided

Rs in crores   Rs in crores

1.4.2013    31.3.2014

Debentors  45   50

Creditors  21   23

Bank                     6

    (b) From the following particulars furnished by Elegant Ltd., prepare the Balance Sheet as on 31st March 2014 as required by part I, revised schedule VI of the Companies Act.


Equity Share Capital (Face value of Rs 100 each)

Call in Arrears

Land & Building

Plant & Machinery


General Reserve

Loan from State Financial Corporation

Stock :
Raw materials

Finished Goods

Provision for Taxation

Sundry Debtors


Proposed Dividend

Profit & Loss Account

Cash in Hand

Cash at Bank

Preliminary expenses

Unsecured Loan

Sundry Creditors(for Goods and Expenses)










10,00, 000

















The following additional information is also provided :

(1) Prelimiary expenses inculded Rs 25,000 Audit Fees and Rs 3,500 for out of pocket expenses paid to the Auditors.

(2) 10000 Equity shares were issued for consideration other than cash.

(3) Debtors of Rs 2,60,000 are due for more than 6 months.

(4) The cost of the Assets were :

   Building Rs 30,00,000, Plant & Machinery Rs 35,00,000 and Furniture Rs 3,12,500.

(5) The balance of Rs 7,50,000 in the Loan Account with State finance Corporation is inclusive of Rs 37,500 for interest Accrued but not Due. The loan is secured by hypothecation of Plant & Machinery.

(6) Balance at  bank includes Rs 10,000 with Global Bank Ltd., which is not a Schedule Bank.

4.   (a) The Balance Sheet of Vaibhav Ltd. as on 31st March is as follows:

Equity Shares of Rs 100 each
Fixed Assets
6% Cumulative Preference of Rs 100 each
Investment (Market Value Rs 19,00,000
5% Debenture of Rs 100 each
Current Assets
Sundry Creditors
P & L A/c
Provision for taxation


The following scheme of internal Reconstruction is sanctioned :

(1) All the existing equity shares are reduced to Rs 40 each.

(2) All preference shares are reduced to Rs 60 each.

(3) The rate of interest on Debentures is increased to 6%. The Debenture holders surrender their existing debenture of Rs 100 each and exchange the same for fresh debenture of Rs 70 each for every debenture held by them.

(4) Fixed assets are to be written down by 20%.

(5) Current assets are to be revealued at Rs 90,00,000.

(6) Investment are to be brought to their market value.

(7) One of the creditors of the company to whom the company owes Rs 40,00,000 decides to forgo 40% of his claim. The creditor is allotted with 6000 equity shares of Rs 40 each in full and final settlement of his claim.

(8) The taxation liability is to be settle at Rs 3,00,000.

(9) It is decided to write off the debit balanced of Profit & Loss A/c Pass journal entries and show the Balance Sheet of the company after giving effect to the above.

     (b) From the following Particulars, prepare the Creditors' Ledger Adjustment Account as would appear in the General Ledger of Mr.Sathish for the month of March 2014.

Purchase from Mr. Akash Rs 7,500
Paid Rs 3,000 after adjusting the initial advance in full to Mr. Akash 
Paid Rs 2,500 to Mr. Dev towards the purchases made in February in full
Paid advance to Mr. Giridhar Rs 6,000
Purchased goods from Mr. Akash Rs 6,200
Returned goods worth Rs 1,000 to Mr. Akash
Settled the balance due to Mr. Akash at a discount of 5%
Goods purchased from Mr. Giridhar against the advantage paid already
Purchased from Mr. Nathan Rs 3,500
Goods returned to Mr. Prem Rs 1,200. The goods were originally purchased for case in the month of February 2014

5.   (a) A fire occured in the premises of M/s Kailash & Co. on 30 September 2013. From the following particulars relating to the period from 1st April 2013 to 30th September 2013, you are required to ascertain the amount of claim to be field with the Insurance Company for the loss of stock.The company has taken an Insurance policy for Rs 75,000 which is subjected to average clause. The value of goods salvaged was estimated at Rs 27,000.The average rate of Gross Profit was 20 % throughout the period.

Opening Stock
Purchase made
Wages paid (including wages for the installation of a machine Rs 5,000)
Goods taken by the Proprietor  (Sale Value)
Cost of goods sent to Consignee on 20 th September 2013, lying unsold with them

Free Samples distributed-Cost

     (b) On 1st April 2014, Hasan has 20,000 equity shares of Vayu Ltd., at a book value of Rs 20 per share (face value of Rs 10 each). He provides the following information :

(1) On 10th June 2014, he purchased another 5,000 shares in Vayu Ltd.,@ Rs 15 per share.

(2) On 1st August 2014, Vayu Ltd., issued one bonus share for every five shares held by the shareholders.

(3) On 31st August 2014, the director of Vayu Ltd., annouced a rights which entile the shareholders to subscribe two shares for every six shares held @ of Rs 15 per share. The shareholders can tranfer their rights in full or in part.

Hasan sold 1/4th of his right share holding to Harsh for a consideration of Rs 3 per share and subsribe the rest on 31st of October 2014.

Prepare Investment A/c in the books of Hasan as on 31st October 2014.

6.   Anuj, Ayuesh and Piyuesh are in partnership sharing profits and losses in the ratio 2:2:1. Their Balance Sheets on 31.3.2014 as follows :

Liabilities Rs
Capital account

Anuj 3,75,000

Ayush 2,80,000

Piyush 2,25,000

General Reserve




Fixed assets


Current assets



Bank FD

Bank balance








     Anuj decided to retire with effect from 1.4.2014.

     The remaining partners were agreed to share profit and loss equllay in future.

     The following adjustment were agreed to be made upon retirment of Anuj :

(1) Goodwill was to be valued at 1 year purchase of the average profits of the preceding 3 years on yhe date of rtirement.

   The average profits of the last 3 years were as follows :

      Year ended Rs

31.3.2014 3,30,000

31.3.2013 2,32,000

31.3.2012 2,20,000

   The partners decided not to raise goodwill account in the books.

(2) The assets were revalued as follows :
   Plant to be depreciated by 10%;
   Creditors amounting to Rs 10,000 were omitted to be recorded;

   Rs 6,000 is to be written off from stock;

   Provision for doubtul debts to be created @ 5% of the debtors;

   Interest accured on FD amounting to Rs 9,000 was omitted to be recorded.

   The above adjustment were to be made from the profit for the year ended 31.3.2014 before calculating of goodwill.

     (3) Anuj agreed to take over the bank FD including interest accured thereon in part payment if his dues and he balance would remain as a loan carrying interest of 8% p.a.

(4) Ayush and Piyush agreed to bring in sufficient cash to make their capitial proportionate and maintain a bank balance of Rs 1,50,000.

   You are required to prepare

   (1) Capitial accounts of parents as on 1.4.2014 giving effect to the above adjustments.

   (2) Balance Sheet as on 1.4.2014 after Anuj's retirement.

7. Answer any four from the following :

(a) From the following information state the amount to be capitialized as per AS 10. Give the explanations for your answers.

   Rs 5 lakhs as routine repairs and Rs 1 lakh on partial replacement of a part of a machine.

   Rs 10 lakh on replcement of part of a machinery which will improve the efficiency of a machine.

(b) What are the advantage of customized accounting software?

(c) What are the difference between Hire Purchase and Installment System ?

(d) From the following particulars prepare a current account, as sent by Mr. Ram to Mr.Siva as on 31st October 2014 by means of product method charging interest @ 5% p.a.

1st July
Balance due from Siva
15th August
Sold goods to Siva
20th August
Goods returned by Siva
22nd Sep
Siva paid by cheque
15th Oct
Received cash from Siva

(e) Kishanlal has made the following sales to Babulal. He allows a credit period of 10 days beyond which the charges interest @ 12 % per annum.

Date of Sales Amount(Rs)

 26-05-14  12,000

 18-07-14  18,000

 02-08-14  16,500

 28-08-14  9,500

 09-09-14  15,500

 17-09-14  13,500

   Babulal wants to settle his account on 30-9-2014. Calculate the interest payable by him using Average Due Date(ADD). If Babulal wants to save interest of Rs 588, how many days before 30.9.2014 does he have to make payment? Also find the payment date in this case.     


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