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Company Accounts & Audit: Intermediate Examination Model Test Paper, Exams of Financial Accounting
A model test paper for the intermediate examination in company accounts & audit, covering topics such as joint stock company accounts, accounting standards, and auditing principles. It includes multiple-choice questions, true/false statements, and comprehensive problems designed to assess understanding of key concepts and their application in real-world scenarios.
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MTP -QP- D2022-INTERMEDIATE EXAMINATION-Syllabus- P12-S
DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1
Paper 12- Company Accounts & Audit
MTP -QP- D2022-INTERMEDIATE EXAMINATION-Syllabus- P12-S
DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 3 (b) Match the following: [4×1=4] Column A Column B
1. Share Surrender A. Accelerated Power Development and Reforms **Programme
- Section 52 B. Issue and Redemption of Preference Shares
- Section 55 C. voluntary return of shares
- Electricity Companies D. Application of share premium account (c) State whether the following statements are True (or) False. [4×1=4] (i) In case of Electricity Companies depreciation shall be allowed upto maximum of 90% of the historical cost of the asset. (ii) There are two types of Underwriting Agreements: (a) Conditional and (b) Firm (iii) Debenture carries a fixed rate of dividend. (iv) The sum which is still to be paid by the Company to the shareholders for a share is known as calls in arrears. PART – II Answer any three questions out of the following four questions [3×12=36]
- (a) Following is the Summarized Balance Sheet (Draft) of OS Ltd. as on 30th**^ September 2021: Equity & Liabilities ₹^ **Assets ₹ Stare Capital: Issued and Fully Paid 5,000 Equity Shares of Rs.100 each fully paid 6 % Redeemable Preference Shares of Rs.100 (Calls in Arrears on 200 Shares) Reserves and Surplus: Share Premium 5,00, 4,95, 1,00, Fixed Assets Investments: (Own Debentures of Nominal of ₹1,00,000) Other Securities Current Assets: 15,00, 95, 1,00, Capital Reserve 1,00,000 Stock 2,00, General Reserve 2,00,000 Debtors 1,01, Profit and Loss A/c 3,00,000 Cash at Bank 6,00, 10 % Debentures 2,00, Sundry Creditors 7,00, Total 25,96,000 Total 25,96, On the basis of the above date, the following were due for redemption:
- 5,000, 6% Redeemable Preference Shares at a Premium of ₹25 per Share.
- 2,000, 10% Redeemable Debentures at a premium of 10%. Redemption was made on that date or subsequently thus: (a) For the half year ending 30th September (i.e. above B/s date), the Debenture Interest and Preference Dividend were paid out of the Profits of the Company. (b) On an offer made to the 10% Debenture Holders, the outsiders agreed to take new 12% Debentures at par in exchange of old Debentures, the Company also decided to as- sume the New Debentures. (c) A Fresh Issue of 1,000 Equity Shares of ₹100 each were made at a Premium of ₹50 per Share and subscribed in full. All Money due were received forthwith. (d) Redemption of all Preference Shares were made on the above date. Assume that Securities Premium A/c is usable for providing the Premium on redemption of Preference Shares. Show all Journal Entries in relation to the above transactions. [8]**
MTP -QP- D2022-INTERMEDIATE EXAMINATION-Syllabus- P12-S
DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 4 (b) PP Limited has set up its business in a designated backward area, which entitles the com- pany to receive from the Government of India a subsidy of 20% of the cost of investment. Having fulfilled all the conditions under the scheme, the company on its investment of Rs. 100 crore in capital assets, received ₹ 20 crore from the Government in January 2022 (accounting period being 2021-2022). The company wants to treat this receipt as an item of revenue and thereby reduce the losses on Profit and Loss Account for the year ended 31st March, 2022. What will be the accounting treatment as per relevant Accounting Standard, discuss whether this action is justified or not. [4]
3. (a) Calculate cash flows from Financing Activities From the following information: April 1,2021 March 31, ₹ ₹ Long-term Loans 4,00,000 5,00, During the year, the company repaid a loan of Rs.2,00,000. [4] (b) Following is an extract from Trial Balance of NBP Bank Ltd. as at 31 st^ **March, 2022: Particulars Dr. ₹ Cr. ₹ Bills Discounted 51,50, Rebate on bills discounted not yet due, March 31,2021 30, Discount received 1,45, An analysis of the bills discounted as shown above shows the following: Date of Bill Amount ₹ Period months Rate of discount % p.a. 31.01. 2022 7,50,000 4 12 17.02. 2022 6,00,000 3 10 06.03. 2022 4,00,000 4 11 16.03. 2022 2,00,000 2 10 Find out the amount of discount received to be credited to Profit and Loss Account and pass appropriate Journal Entries for the same. How the relevant items will appear in the Bank’s Balance Sheet? [8]
- Following Trial Balance of H Ltd. has been extracted, after preparation of Profit & Loss Account as on 31.0.2022. Debit balances ₹ Credit balances ₹ Plant & Machinery 1,60,000 Equity Share (₹ 10 each) 1,90, Furniture & Fixture 34,000 Reserves 30, Investments 60,000 Profit & Loss A/c (01-04-21) 66, Inventory 16,000 15% Loans 60, Debtors 80,000 Creditors 46, Cash & Bank 36,000 Bills Payable 16, Advance to suppliers 24,000 Outstanding wages 6, Advance tax 36,000 Profit for the year 58, Patent 30,000 Provision for tax (21-22) 25, Prepaid expenses 6,000 Provision for tax (20-21) 20, Bills receivables 15, Proposed dividend 18, Dividend distribution tax 2, 5,17,700 5,17,**
MTP -QP- D2022-INTERMEDIATE EXAMINATION-Syllabus- P12-S
DoS, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 6 (b) Match the following: [5×1=5] Column A Column B
1. The authority for Government Audit. A. Materiality in planning and **performing an Audit
- GRA 7 Challan B. Unqualified opinion
- SA 320 C. Comptroller & Auditor General of** **India.
- True and fair audit report D. Excise Duty (c) State True or False for the following : [5×1=5] (i) External Auditors are appointed by the shareholder of the Company. (ii) The concept of true and fair is a fundamental concept in auditing. (iii) An audit report is the end product of auditing. (iv) As per ICAI (CA) auditor need to retain the working paper for a period of 5 years. PART – II Answer any three questions out of the following four questions [3×12=36]
- (a) Enumerate any five basic elements of Internal Control.. [7] (b) List the differences between audit and investigation [5]
- (a) Discuss the powers of the Audit Committee? [8] (b) State the certain services which are not to be rendered by the Auditor of a com- pany. [4]
- (a) Write down the eligibility criteria for appointment of a cost auditor? [10] (b) List the features of Consolidated Financial Statement [CFS] [2]
- Write short notes on ( any three) [3×4=12] (a) Audit of hospital (b) Differences between Statutory Audit and Internal Audit (c) Joint audit (d) Audit of Inventories**
CA AKASH AGARWAL
ACCOUNT& AUDIT MTP- 2022 SOLUTION
CMA-INTERMEDIATE
AKASH AGARWAL CLASSES MOB. NO. - (^9545879706 )
- A) Choose the correct alternatives:
- In a Financial Statement where does Cost of Materials Consumed appear? (A) “Expenses” in Statement of Profit and Loss (B) Shareholders Fund” in Balance Sheet (C) Other Non- Current Assets” in Balance Sheet Assets side (D) None of the above
- Section of The Companies Act,2013 relates to Issue of Sweat Equity Shares (A) 54 (B) 52 (C) 53 (D) 68
- A company may buy-back its shares or other specified securities out of which of the following? (A) Proceeds of an earlier issue of same kind of shares (B) securities premium account (C) the proceeds of any shares or other specified securities like e mployees‘ stock option (D) Both (B) and (C)
- A / an has voting rights. (A) Debenture holder (B) Preference Shareholder (C) Equity Shareholder (D) Creditor
- means the issue of new debentures in the place of old ones. (A) Follow on public offer (B) Rollover (C) Right Issue (D) Buy-back of shares
- CERC stands for (A) Central Electricity Regulatory Commission (B) Central Electricity Regulation Commission (C) Central Electricity Regulatory Committee (D) Central Electricity Regulation Committee SOLUTIONS FOR ACCOUNT & AUDIT MOCK TEST DEC- 2022
CA AKASH AGARWAL
ACCOUNT& AUDIT MTP- 2022 SOLUTION
CMA-INTERMEDIATE
AKASH AGARWAL CLASSES MOB. NO. - (^9545879706 ) General Reserve 2,00.000 Debtors 1,01, Profit and Loss A/c 3,00,000 Cash at Bank 6,00, 10 % Debentures 2,00, Sundry Creditors 7,00, Total 25,96,000 Total 25,96, On the basis of the above date, the following were due for redemption:
1. 5,000, 6% Redeemable Preference Shares at a Premium of ₹25 per Share.
- 2,000, 10% Redeemable Debentures at a premium of 10%. Redemption was made on that date or subsequently thus: (a) For the half year ending 30th September (i.e. above B/s date), the Debenture Interest and Preference Dividend were paid out of the Profits of the Company. (b) On an offer made to the 10% Debenture Holders, the outsiders agreed to take new 12% Debentures at par in exchange of old Debentures, the Company also decided to assume the New Debentures. (c) A Fresh Issue of 1,000 Equity Shares of ₹100 each were made at a Premium of ₹50 per Share and subscribed in full. All Money due were received forthwith. (d) Redemption of all Preference Shares were made on the above date. Assume that Securities Premium A/c is usable for providing the Premium on redemption of Preference Shares. Show all Journal Entries in relation to the above transactions. (8M) ANSWER: Journal Entries in the books of Om Shanti Ltd. S. No. Particulars Dr. ( ₹ )^ Cr. ( ₹ )
- Profit and^ Loss A/c^ Dr. To Interest on Debentures A/c To Preference Dividend A/c (Being Interest on Debentures at 10% for 6 months, and Dividend on Paid up value of Preference Share Capital at 6% for 6 months)
- Interest on Debentures A/c Dr. To Interest on Own Debentures A/c To Bank A/c (Being adjustment for interest on Investment in Own Debentures since 50% of the Debentures is held by the Company and payment of interest to outsiders)
- Preference Dividend A/c Dr. To Bank A/c (Being payment of Preference Dividend to outsiders)
- Bank^ A/c^ Dr. To Calls in Arrears A/c (Being the Calls in Arrears on 200 Preference Shares received)
CA AKASH AGARWAL
ACCOUNT& AUDIT MTP- 2022 SOLUTION
CMA-INTERMEDIATE
AKASH AGARWAL CLASSES MOB. NO. - (^9545879706 )
- 10% Debenture A/c^ Dr. Premium on Redemption of Debentures A/c Dr. To Debenture holder’s A/c (Being the amount due on redemption of 10% Debentures at a Premium of 10%)
- Securities Premium A/c^ Dr. To Premium on Redemption of Debentures A/c (Being Premium on Redemption of Debentures are written off to Securities premium)
- Debenture holder’s A/c^ Dr. To 12 % Debentures (New Series) A/c (Being the issue of New 12 % Debentures to the Debenture holders)
- Investment in Own 12% Debentures (New Series) A/c^ Dr. To Investment A/c - for cancellation To Profit and Loss A/c - for transfer of Surplus (Being the exchange of Own 10% Debentures by Own 12% Debentures (New Series), surplus being transferred to Profit and Loss A/c)
- Bank A/c^ Dr. To Equity Share Capital A/c To Securities Premium A/c Being the Fresh Issue of Equity Shares of ₹ 100 each at a Premium of 50 per share made for the purpose of redemption of preference shares)
- General Reserve A/c^ Dr. Profit and Loss A/c Dr. To Capital Redemption Reserve A/c Being the transfer out of Reserves and Surplus an amount equal to Nominal value of Preference Shares redeemable otherwise then out of the proceeds of Fresh fetal
5,00,000 - Fresh Equity Issue1,00,000)
- 6%^ Redeemable Preference Share Capital A/c^ Dr. Premium on Redemption of Preference Shares A/c Dr. To Preference Shareholders A/c (Being amount due to Preference Shareholders, at a premium of ₹ 25 per share)
- Securities Premium A/c^ Dr. To Premium on Redemption of Preference Shares A/c (Being premium on redemption of Preference Shares provided out of Securities Premium)
- Preference Shareholders A/c^ Dr. To Bank A/c (Being the amount paid to Preference Shareholders on redemption)
- Interest on Own^ Debentures A/c^ Dr. To Profit and Loss A/c (Being the transfer of Interest on Own Debenture)
Note: Preference Dividend is payable in proportion to the amount paid up on Preference Shares. It is assumed that the Articles of Association of the Company authorise such payment.
CA AKASH AGARWAL
ACCOUNT& AUDIT MTP- 2022 SOLUTION
CMA-INTERMEDIATE
AKASH AGARWAL CLASSES MOB. NO. - (^9545879706 ) Balance c/d 5,00,000 Bank A/C (Loan Raised) 3,00, 7,00,000 7,00, (b) Following is an extract from Trial Balance of NBP Bank Ltd. as at 31st March, 2022: Particulars Dr. ₹ Cr. ₹ Bills Discounted 51,50, Rebate on bills discounted not yet due, March 31,2021 30, Discount received 1,45, An analysis of the bills discounted as shown above shows the following: Date of Bill Amount ₹ Period months Rate of discount % p.a. 31.01. 2022 7,50,000 4 12 17.02. 2022 6,00,000 3 10 06.03. 2022 4,00,000 4 11 16.03. 2022 2,00,000 2 10 Find out the amount of discount received to be credited to Profit and Loss Account and pass appropriate Journal Entries for the same. How the relevant items will appear in the Bank’s Balance Sheet? (8M) ANSWER: Calculation of Unexpired Discount or Rebate on Bills Discounted Date of Bill Date of Maturity No. of days after 31.03.201 7 Amou nt Rate of Discount % p.a. Total Amount of Discount Proportionate Discount of days after 31.03. 13.01.2017 16.05.2017 46 7,50, 00
12 90,000 90,000×46/365=
10 60,000 60,000×50/365=
11 44,000 44,000× 100/
10 20,000 20,000 × 49/365 =
Unexpired Discounts on 31.03.
CA AKASH AGARWAL
ACCOUNT& AUDIT MTP- 2022 SOLUTION
CMA-INTERMEDIATE
AKASH AGARWAL CLASSES MOB. NO. - (^9545879706 ) Dr. Discount Account Cr Date Particulars () Date Particulars () 31.03.2017 To Rebate on Bills Discounted To Profit & Loss A/c
By Rebate on Bills Discounted as on 01.04. By Sundries
Journal Particulars L.F. Dr. () Cr. () Rebate on Bills Discounted A/c Dr. To Discount A/c (Unexpired discount brought forward)
Discount A/c Dr. To Rebate on Bills Discounted A/c (Provision for unexpired discount)
Discount A/c Dr. To Profit & Loss A/c (Discount earned for the year)
- (a) Discuss under following situations, who is liable pay GST and take GST registration. Debit balances ₹ Credit balances ₹ Plant & Machinery 1,60,000 Equity Share (₹10 each) 1,90, Furniture & Fixture 34,000 Reserves 30, Investments 60,000 Profit & Loss A/c (01- 04 - 21) 66, Inventory 16,000 15% Loans 60, Debtors 80,000 Creditors 46, Cash & Bank 36 ,000 Bills Payable 16 , Advance to suppliers 2 4,000 Outstanding wages 6, Advance tax 3 6,000 Profit for the year 58, Patent 30 ,000 Provision for tax (21-22) 25, Prepaid expenses 6,000 Provision for tax (20-21) 20, Bills receivables 15, Proposed dividend 18, Dividend distribution tax 2,
CA AKASH AGARWAL
ACCOUNT& AUDIT MTP- 2022 SOLUTION
CMA-INTERMEDIATE
AKASH AGARWAL CLASSES MOB. NO. - (^9545879706 ) Notes: Reserve & Surplus: Trade payables: General Reserve: 01- 04 30,000 Creditors 46, Addition during the year 2,900 Bills Payable 16, Profit & Loss: 01- 04 66,000 62, PAT for the year 58,000 Other Current Liabilities: Transfer to Reserve (58,000 × 5%) (2,900) Outstanding Wages 6, Dividend paid (18,000) Tax liability for 15- 16 3, D.T paid (2,700) 9, Over-provision of Tax for 2015- 16 2,700 1,36, Trade Receivables: Short term Loans & Advances: Debtors 80,000 Advance to Supplier 24, Bills Receivables 15,000 Advance tax (36,000 – 15,000)
- Write short note (any three): (a) Share application money pending allotment ANSWER: Share application money pending allotment As per Schedule III it is to be shown as a separate line item on the face of Balance Sheet. Other provisions in this respect are as follows: (i) Share Application Money not exceeding the Issued Capital and to the extent not refundable, is to be disclosed as a separate line item after - Share Holders Funds and before
- Non-Current Liabilities. (ii) If the Company's Issued Capital is more than the Authorized Capital, and approval of increase in Authorized Capital is pending, the amount of Share Application Money received over and above the Authorized Capital should be shown under the head - Other Current Liabilities.
CA AKASH AGARWAL
ACCOUNT& AUDIT MTP- 2022 SOLUTION
CMA-INTERMEDIATE
AKASH AGARWAL CLASSES MOB. NO. - (^9545879706 ) (iii) The amount shown as Share Application Money Pending Allotment will not include Share Application Money to the extent refundable. For example, the amount, in excess of Issued Capita], or where Minimum Subscription requirement is not met. Such amount will have to be shown separately under 'Other Current Liabilities'. (iv) Calls Paid in Advance are to be shown under - Other Current Liabilities. The amount of interest which may accrue on such advance should also is to be reflected as a Liability. (b) Right Issue of Shares; ANSWER: Where at any time, a company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer subject to the following conditions, namely: — (i) the offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined; (ii) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause (i) shall contain a statement of this right; (iii) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not disadvantageous to the shareholders and the company. (c) Geographical Segments as per AS 17 ANSWER: A geographical segment is a distinguishable component of an enterprise that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments. Factors that should be considered in identifying geographical segments include: (a) similarity of economic and political conditions; (b) relationships between operations in different geographical areas; (c) proximity of operations; (d) special risks associated with operations in a particular area; (e) exchange control regulations; and (f) the underlying currency risks.
CA AKASH AGARWAL
ACCOUNT& AUDIT MTP- 2022 SOLUTION
CMA-INTERMEDIATE
AKASH AGARWAL CLASSES MOB. NO. - (^9545879706 ) (a) 50 crore (b) 100 crore (c) 200 crore (d) 250 crore (v) Audit of debenture is covered under section- (a) Section 70 (b) Section 71 (c) Section 72 (d) Section 73 (vi) The ____________is also expected to provide the resources needed and select staff members to accompany the auditors. (a) Client (b) Internal Auditor (c) Auditor (d) Auditee (b) Match the following: Column „A‟ Column „B‟ The authority for Government Audit Comptroller & Auditor General of India GRA 7 Challan Excise Duty SA 320 Materiality in planning and performing an Audit True and fair audit report Unqualified opinion (c) State True or False for the following : (i) External Auditors are appointed by the shareholder of the Company. ANS: The given statement is True. (ii) The concept of true and fair is a fundamental concept in auditing. ANS: The given statement is True. (iii) An audit report is the end product of auditing. ANS: The given statement is True. (iv) As per ICAI (CA) auditor need to retain the working paper for a period of 5 years. ANS: The given statement is False. PART II
CA AKASH AGARWAL
ACCOUNT& AUDIT MTP- 2022 SOLUTION
CMA-INTERMEDIATE
AKASH AGARWAL CLASSES MOB. NO. - (^9545879706 ) 7.(a) Enumerate any five basic elements of Internal Control. ANSWER: Internal control systems operate at different levels of effectiveness. Determining whether a particular internal control system is effective is a judgement resulting from an assessment of whether the five components - Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring - are present and functioning. Effective controls provide reasonable assurance regarding the accomplishment of established objectives.
- Control Environment The control environment, as established by the organization's administration, sets the tone of an institution and influences the control consciousness of its people. Leaders of each department, area or activity establish a local control environment. This is the foundation for all other components of internal control, providing discipline and structure. Control environment factors include: Integrity and ethical values; The commitment to competence; Leadership philosophy and operating style; The way management assigns authority and responsibility, and organizes and develops its people; Policies and procedures.
- Risk Assessment Every entity faces a variety of risks from external and internal sources that must be assessed. A precondition to risk assessment is establishment of objectives, linked at different levels and internally consistent. Risk assessment is the identification and analysis of relevant risks to achievement of the objectives, forming a basis for determining how the risks should be managed. Because economics, regulatory and operating conditions will continue to change, mechanisms are needed to identify and deal with the special risks associated with change. Objectives must be established before administrators can identify and take necessary steps to manage risks. Operations objectives relate to effectiveness and efficiency of the operations, including performance and financial goals and safeguarding resources against loss. Financial reporting objectives pertain to the preparation of reliable published financial statements, including prevention of fraudulent financial reporting. Compliance objectives pertain to laws and regulations which establish minimum standards of behavior. The process of identifying and analyzing risk is an ongoing process and is a critical component of an effective internal control system. Attention must be focused on risks at all levels and necessary actions must be taken to manage. Risks can pertain to internal and external factors. After risks have been identified they must be evaluated.