Accounting Foundation Exam Paper 1

• This is a Foundation Exam Paper 1 for Accounting.
• The exam duration is 3 hours and the maximum marks are 100.
• Question 1 is compulsory, and candidates must answer any four questions from the remaining five.

Question 1(a): True or False Statements

• Matching concept is based on the accrual concept.
• Customers of a business shouldn't be considered users of accounts.
• Under inflationary conditions, FIFO will not show the lowest value of the cost of goods sold.
• Proceeds from the fresh issue of equity shares and debentures can be utilized for the redemption of preference shares.
• Bookkeeping and accounting are not synonymous terms.
• A ledger is also known as the principal books of accounts.

Question 1(b): Accounting Functions

• This question requires explaining four main functions of accounting.

Question 1(c): Sales Return Book

• Requires preparing a sales return book for Kay & Co.
• Transactions include returns from Aar Store and Tulip Store with trade discounts.

Question 2(a): Machinery Account

• A firm purchased second-hand machinery on April 1, 2021
• Subsequent repairs and installation costs were incurred.
• Another machinery was purchased on October 1, 2021, with installation costs.
• Machinery purchased in 2021 was moved, incurring freight charges.
• Depreciation was charged at 12% per annum using the diminishing balance method initially.
• On April 1, 2023, the method changed to straight-line depreciation with a 5-year remaining life and no scrap value.
• The first machine was sold on October 1, 2023.
• A new machine was purchased with an estimated useful life of 10 years and a residual value of ₹30,000.
• Requires preparing the machinery account for the year ending March 31, 2024.

Question 3(b): Bank Reconciliation Statement

• Requires preparing a Bank Reconciliation Statement as of June 30, 2024, for M/s XYZ Limited.
• Includes items like overdrawn cash book, unentered bank charges, unpresented cheques, wrongly recorded payments, errors in cash book, uncleared cheques, unrecorded dividends.

Question 3(a): Trading and Profit and Loss Account and Balance Sheet

• Requires preparing the Trading and Profit and Loss Account and Balance Sheet from the given balances of Mr. Piyush for the year ending March 31, 2024.
• Adjustments need to be made.
• The balances include capital account, stock, cash, investments, deposits, drawings, purchases, sales, returns, carriage, rent, salaries, debtors, creditors, bank loan, furniture, interest, advertisement, printing, electricity, discount, bad debts, and other expenses.

Adjustments

• The value of stock includes goods returned by customers for which no entry was passed.
• Purchases include a furniture item.
• There is outstanding rent and salary payable.
• Interest paid includes an amount against a Bank loan, and interest received pertains to investments and deposits.
• Provision for interest payable on Bank Loan and receivable on investments and deposits is required.
• Make provision for doubtful debts.
• Add Insurance premium that includes proprietor's life insurance policy.

Question 3(b): Partnership - Profit/Loss and Interest on Drawings/Capital

• X and Y are partners, sharing profits and losses in the ratio of their effective capital.
• They have opening capitals of ₹2,80,000 and ₹1,60,000 respectively.
• X introduces additional capital and withdraws amounts.
• Y introduces additional capital.
• X and Y withdrew amounts at the beginning of each quarter and at the end of each month respectively
• Profits are to be shared in capital ratio.
• The interest on capital and drawings are to be calculated

Question 4(a): Partnership Accounting

• A, B, and C are partners sharing profits & losses in the ratio of 3:2:1. Balance sheet of their firm M/s ABC Trading Corporation as on 31st March, 2024 is given.
• C died on 30th June, 2024
• Requires preparing Revaluation Account, Partners Capital Accounts, and Balance Sheet as on 30th June, 2024.
• Goodwill is to be valued at 2 years' purchase of average profit.
• Assets are to be revalued, Provision for doubtful debts to be increased.
• Insurance company paid against Joint Life Policy.

Question 4(b): Statement of Affairs and Profit/Loss

• Following are the details of Assets and Liabilities of Mr. Sarthak
• It was decided to depreciate Building and Furniture.
• An additional capital was brought in the business
• Proprietor has withdrawn an ammount for meeting the family expenses.
• Prepare Statement of Affairs as on 31st March, 2023 and 31st March, 2024.

Question 5(a): Income and Expenditure Account

• Requires preparing a receipt and payment account and balance sheet for a club.
• Additional Information is given.

Question 5(b): Bills of exchange OR raw material of a manufacturing unit

• Mr. A accepts two bills of exchange drawn on him by Mr. B. OR The following details are available of raw material of a manufacturing unit.

Question 6(a): Debentures

• A company had issued partly convertible debentures.
• Calculate the number of equity shares to be allotted to the debenture holders.
• Give journal entries related to the conversion and redemption of debentures

Question 6(b): Equity Shares

• Arpit Ltd. invited applications for Equity shares at a premium.
• Give journal entries with narrations to record all these transactions in the books of Arpit Ltd.

Question 6(c): Advantages of Double Entry System

• Requires a discussion on the advantages of the double-entry system.