Financial Accounting Past Paper PDF

## OCTOBER - 2014 ### A. FILL IN THE BLANKS 1. 'Interest accrued and due on debentures' will appear under the head **Other current liabilities** in the Balance Sheet of the company. 2. The scheme of Internal Reconstruction involves **two companies**. 3. Computer software is shown under the hea...

## OCTOBER - 2014 ### A. FILL IN THE BLANKS 1. 'Interest accrued and due on debentures' will appear under the head **Other current liabilities** in the Balance Sheet of the company. 2. The scheme of Internal Reconstruction involves **two companies**. 3. Computer software is shown under the head **Intangible Assets** in the Balance Sheet of a company. 4. When Short Term Investments are sold, profit on such sale is transferred to **Capital Reserve Account**. 5. In Internal Reconstruction, the balance in Capital Reduction Account is utilised for **writing off fictitious assets**. 6. Profit on sale of short term investments is calculated using the formula, selling price less **Cost**. 7. **General Reserve** is an example of free reserve. 8. An amount equal to face value of equity shares bought back out of free reserve, should be transferred to **Capital Redemption Reserve** account. 9. After buy back of shares, Debt-Equity Ratio should not exceed **2:1**. ### B. STATE WHETHER TRUE OR FALSE 1. In Internal Reconstruction, consolidation of shares results in profit for a company. **False** 2. Debenture is a fixed income bearing security. **True** 3. Interest on debentures is calculated on the face value of debentures. **True** 4. Arrears of Preference dividend is shown under 'Other Current Liabilities' in the Balance Sheet of a company. **False** 5. No journal entry is required for cancellation of unissued share capital at the time of Internal Reconstruction. **True** 6. 'Livestock' is shown under 'Tangible Fixed Asset' in the Balance Sheet of a company. **True** 7. Balance in Capital Reduction Account is transferred to Capital Reserve Account. **True** 8. A company cannot buy-back more than 25% of its paid up equity capital in any financial year. **True** 9. Buy-back of shares can be done out of free reserves of the company. **True** ## APRIL-2015 ### A. FILL IN THE BLANKS 1. 'Interest accrued but not due' on debentures appears under the head **Other current liabilities** in the Balance Sheet of a company. 2. Investment Accounting is governed by **AS 13**. 3. Consolidation and sub-division of shares result in **Reduction in share capital**. 4. If contingent liability is foregone, it is **recorded** in the capital reduction account. 5. Staff welfare expenses are shown under the head **Employees benefit expenses** in the statement of profit and loss of a company. 6. Loss from natural calamities like earthquakes, floods is shown under the head **Extra ordinary items** in the statement of profit and loss of a company. 7. Profit on sale of short term investment is calculated by using the formula selling price less **Cost**. 8. An amount equal to the face value of equity shares bought back out of free reserve, should be transferred to **General Reserve** account. ### B. STATE WHETHER TRUE OR FALSE 1. At the end of the year, Non-Current Investments are valued at cost. **True** 2. Increase in value of Land and Building is recorded on the credit side of Capital Reduction Account. **True** 3. No new company is formed at the time of Internal Reconstruction of companies. **True** 4. Debenture is a fixed income bearing security. **True** 5. Surrendered shares cannot be re-issued. **False** 6. 'Capital work-in-progress' is shown under the head 'Share Capital' in the Balance sheet of a company. **False** 7. 'Licenses' are shown under the head 'Intangible Assets' in the Balance Sheet of a company. **True** 8. A company cannot buy back more than 25% of its paid up equity capital in any financial year. **True** 9. After buy back of equity shares, debt-equity ratio should not exceed 1:2. **False** ## OCTOBER - 2015 ### A. MATCH THE COLUMNS **Column 'A'** | **Column 'B'** ------- | -------- Computers | Fixed Income bearing security Computer Software | Credited to Capital Reduction Account Discount on issue of Shares not written off | Variable Income bearing security Equity Shares | Contingent Liability Debentures | Employee Benefit Expenses Increase in the value of building | Debited to Capital Reduction Account Decrease in the value of Investments | Tangible Fixed Asset Office Salaries | Intangible Fixed Asset Buy back must be | Fictitious Assets Discount on Buy back of Shares | Debited to Equity Shareholders Account | Transferred to Capital Reserve | Authorised by the Articles of Association ### B. STATE WHETHER TRUE OR FALSE 1. Dividend on shares is calculated on the cost of shares. **False** 2. Disputed income tax liability is a contingent liability. **True** 3. Bonus shares are shares which are issued free of cost to the existing equity shareholders. **True** 4. Investment Accounting is governed by AS 11. **False** 5. Copy rights is shown under the head Tangible Fixed Assets in the Balance Sheet of Limited Company. **False** 6. There is no difference between Internal and External Reconstruction of companies. **False** 7. Reduction in Creditors is debited to Capital Reduction Account. **False** 8. Balance in Capital Reduction Account is transferred to Capital Redemption Reserve Account. **False** 9. A company cannot buy back more than 25% of its paid up equity capital in any financial year. **True** 10. Buy Back results in reduction of share capital to the extent of face value of shares bought back. **True** ## NOVEMBER-2016 ### A. MATCH THE COLUMNS **Column 'A'** | **Column 'B'** ------- | -------- Appreciation in the value of Fixed Assets is | Short term provision Disclosure of Franchises | Credited to Capital Reduction Account Disclosure of Land and Building | Debited to Capital Reduction Account Disclosure of Interest Accrued and due on Debentures | Intangible Fixed Assets During Internal Reconstruction, increase in the value of creditors is | Tangible Fixed Assets During Internal Reconstruction, Cum-Interest and Ex-Interest Price | Short Term Loans and Advances Disclosure of Provision for Taxation | Credited to Realisation Account | Other Current Liabilities ### B. STATE WHETHER TRUE OR FALSE 1. Sale Proceeds on Sale of Right entitlement is credited to Profit and Loss Account. **True** 2. Unclaimed Dividend is shown under the head 'Other Current Liabilities' in the Balance Sheet of a Limited Company. **True** 3. Contingent Liability is shown as a footnote in the Balance Sheet of a Limited Company. **True** 4. In Personal Investment Accounting, dividend received on investments in shares for post acquisition period is credited to Profit and Loss Account. **True** 5. In Personal Investment Accounting, Long-term Investments, at the end of the year are valued at cost. **True** 6. 'Computer Software' is shown under the head 'Intangible Fixed Assets' in the Balance Sheet of a Limited Company. **True** 7. Internal Reconstruction Expenses are debited to Capital Reduction Account. **True** 8. During Internal Reconstruction there is no liquidation of company. **True** 9. The partly paid shares can be bought back. **False** 10. After buy back of shares, the Debenture-Equity ratio should not exceed 1:2. **False** ## NOVEMBER - 2017 ### A. MATCH THE COLUMNS **Column 'A'** | **Column 'B'** ------- | -------- Amalgamation of Companies | Shareholders Funds Personal Investment Accounting | Fixed Income Bearing Security Equity Shares | Tangible Fixed Assets Government Bonds | Current Asset Amalgamation Adjustment Reserve | AS-13 Trade Receivables | Variable Income Bearing Securities Cum-Interest Price of Investment | AS-14 Disclosure of Land and Building | Statutory Reserve Net Asset Method | Includes Interest During Internal Reconstruction, increase in the value of asset is | Purchase Consideration | Credited to Capital Reduction A/c | Debited to Capital Reduction A/c ### B. STATE WHETHER TRUE OR FALSE 1. No new company is formed at the time of Internal Reconstruction. **True** 2. On amalgamation of companies, the company which takes over another company is called Transferee company. **True** 3. When short term investments are sold, profit on such sale is transferred to profit and loss account. **True** 4. IRFS stands for International Financial Reporting Standards. **True** 5. Computer Software is shown under the head Intangible assets in the balance sheet of a company. **True** 6. Arrears of Preference Dividend is shown under 'Other current liabilities' in the balance sheet of a company. **False** 7. Balance in the Capital Reduction Account in transferred to Capital Redemption Reserve Account. **False** 8. Interest on Debentures is calculated on cost of debentures. **False** 9. Surrendered shares cannot be reissued. **False** 10. Capital work in progress is shown under the head 'Share Capital' in the balance sheet of a company. **False** ## SOLUTION 1 (a): 1. A Debt Equity Ratio after buyback of shares should be maintained up to 2 : 1 as per legal requirement. **True** 2. Reduction in Liability is debited to Capital Reduction A/c. **False** 3. Investment Accounting is governed by AS 13. **True** 4. In personal investment accounting, dividend received on shares for pre-acquisition period is treated as revenue gain. **False** 5. Goodwill is classified as Property, Plant and Equipment under the Companies Act. **True** 6. As per CSR policy it is mandatory for certain companies to spend 5% of their average net profit of three immediately preceding financial years. **False** 7. Law has a legal binding but ethics do not have a binding nature. **True** 8. Consolidation of shares results in profit for a company. **False** 9. Interest paid is disclosed under Finance Cost in Profit and Loss A/c. **True** 10. For a company, dividend paid is an expense. **False** 11. Capital Reduction requires court's sanction. **True** 12. Public deposit is secured loan. **False** ## SOLUTION 1 (b): 1. Bills receivable is shown under Trade Receivables in Balance Sheet. 2. Internal reconstruction is done as per section 66 of Companies Act. 3. Buy-back of equity shares can be of Fully paid up shares. 4. Ex-interest price includes Cost only. 5. The term 'Ethics' comes from Greek word. 6. Accounting Standard Board is constituted by ICAI. 7. The premium received on sale of rights is credited to Profit and Loss A/c. 8. A company cannot buy back more than 25% of its own funds. 9. Reconstruction expenses are Debited to Capital Reduction A/c. 10. The final accounts of companies are to be prepared in accordance with the provisions of Schedule III of Companies Act, 2013. 11. Arrears of preference dividend is shown under Contingent liabilities. 12. Current investments are valued at cost or market value whichever is Lower. ## SOLUTION 1 (a): 1. The buy back of shares has to be authorised by articles of association. **True** 2. Internal reconstruction involves reduction in capital. **True** 3. Amount paid on forfeited shares is added to paid-up capital in the balance sheet. **True** 4. When the rights are sold without subscribing, no entry is made in Investment A/c. **True** 5. Equity shares can be bought-back out of free reserves. **True** 6. Capital reserve is a non-free reserves. **True** 7. Any company can undertake capital reduction. **False** 8. Liability in respect of bills discounted is not an example of contingent liability. **False** 9. Short-term investments are carried at its cost price only. **False** 10. No company shall buy back its own shares unless the buyback is less than 10% of the total paid-up capital and free reserves of the company. **False** 11. In internal reconstruction, amount of shares surrendered by shareholders is transferred to General Reserve Account. **False** 12. In ethical views, ethics remain same at all the time and every place. **False** ## SOLUTION 1 (b): 1. As per AS 13, the cost of investment sold is to be calculated as per weighted average method. 2. The carrying amount of long term investment is to be shown at cost. 3. The components of workplace ethical behaviour are honesty, legality and disclosure. 4. Charging cost of family dinner to the company is misappropriation of assets. 5. The amount not collected by shareholders should be shown as current liabilities. 6. Before buyback, all the shares must be fully paid up. 7. The ethical issues faced by the accountants include accuracy, accountability, values and moral. 8. Payment of dividend is based on paid up capital. 9. Schedule III of Companies Act, 2013 requires profit and loss account to be prepared in vertical form. 10. Interim dividend of a company can be declared by board of directors. 11. The scheme of Internal reconstruction required sanction from shareholders, articles of association and court. 12. Z Ltd. has 8,000 equity shares of ₹100 each fully paid. Each share is sub-divided into equity shares of 10 each. The number of shares after sub-division will be 80,000. ## SOLUTION 1 (a): 1. Interest accrued but not due on bank loan appears in balance sheet under the head of Other Current Liabilities. 2. Arrears of preference dividend is not paid in the internal reconstruction scheme, no entry appears. 3. Investment Accounting is governed by AS 13. 4. Buy back of shares results in Reduction of Share Capital. 5. One of the following is not regarding the internal reconstruction. - Liquidation of company 6. Whistle blowing is an act of reporting illegal activities. 7. CSR stands for Corporate Social Responsibility. 8. Copyrights is shown in Company Balance Sheet under the head of Intangible Assets. 9. One of the following is not a fixed income investment. - Equity Shares 10. One of the following is not the sources of buy back of shares. - Profit and Loss Account 11. Ex-interest price and cum-interest price are the prices relating to Debentures. 12. One of the following is not the ethics of professional accountant. - Frauds ## SOLUTION 1 (b): **Column A** | **Column B** ------- | -------- Balance in Capital Reduction Account | Transferred to Capital Reserve Account Goodwill written off | Debited to Capital Reduction Account Partly Paid Equity Shares | Cannot be Bought Back Wages and Bonus | Employees Benefit Expenses Loose Tools | Inventories Pre-Acquisition Dividend | Deducted from the Cost of Investment Post-Acquisition Dividend | Revenue Receipts General Reserve | Free Reserve Security Premium | Premium on Buy Back of Shares written off Code of Ethics | Set of Standards and Principles Sub-division of Shares | Increase in Number of Shares Ex-Interest Price | Excluding Interest ## SOLUTION 1 (a): 1. AS 14 is applicable for the investment accounting. **False** 2. Partly paid-up shares can be bought back. **False** 3. General reserve is a non-free reserve. **False** 4. Sundry creditors are shown in trade payables. **True** 5. Company is not liquidated in internal reconstruction. **True** 6. Company has to spend 5% of the net profit for the corporate social responsibility. **False** 7. Ethics are the rules which should be followed by all. **False** 8. Profti and loss account and security premium are also the sources of buy-back of shares. **True** 9. Loss on sale of investment is debited to profit and loss account. **True** 10. In company balance sheet, capital reserve is shown in the head of share capital. **False** 11. Claims forgone by creditors are debited in the capital reduction account. **False** 12. Computer software is the intangible asset. **True** ## SOLUTION 1 (b): 1. Interest on debenture is calculated on Face value. 2. Bills payable is shown under Trade payables. 3. The word 'ethics' is derived from Greek. 4. Stautory audit is conducted by External auditor. 5. Employee salary is shown under Employee benefits expense. 6. Interet on bank loan paid is shown under Finance costs. 7. Sub-division of shares is Value of shares reduced. 8. Debt Equity Ratio after buy-back of shares should be in 2:1. 9. Surrender of shares means giving up possession of shares. 10.Dividend on equity shares are ascertained on the basis of Paid-up capital. 11. Before buy-back all the shares must be fully paid-up. 12. Cheque on hand should be shown under the head of Cash and cash equivalents.