Mock Test Paper - Series II: January, 2027
Date of Paper: 31st December, 2026
Time of Paper: 10.30 A.M. to 1.30 P.M.
FOUNDATION COURSE
PAPER – 1: ACCOUNTING
ANSWERS
1. (a) (i) False: Depreciation is a charge against profit and not an
appropriation of profit. Therefore, depreciation has to be provided
for, even in case of loss in a financial year.
(ii) False: At the end of the accounting year, all the nominal accounts
of the ledger book are totalled and transferred to Profit & Loss A/c.
(iii) False: Amount spent for replacement of any worn- out part of a
machine is revenue expense since it is part of its maintenance cost.
(iv) False: In case of admission of new partner in a partnership firm,
profit/loss on revaluation account is transferred to old partners in
their old profit-sharing ratio.
(v) False: The debit notes issued are used to prepare purchases return
book.
(vi) False: Debentures Suspense Account appears on asset side of
Balance Sheet under Non-Current Asset.
(b) Accounting Standards are selected set of accounting policies or broad
guidelines regarding the principles and methods to be chosen out of
several alternatives. The Accounting Standards Board of the Institute of
Chartered Accountants of India (ICAI) formulates Accounting Standards
to be established by the Council of the ICAI. The main objective of
Accounting Standards is to establish standards which have to be
complied with, to ensure that financial statements are prepared in
accordance with generally accepted accounting principles. Accounting
Standards seek to suggest rules and criteria of accounting
measurements. These standards harmonize the diverse accounting
policies and practices at present in use in India.
(c) Corrected Trial Balance of Mr. Govind as on 31st March, 2024
Particulars Dr. Amount ` Cr. Amount `
Govind ’s Capital 14,004
Govind ’s Drawings 5,076
Leasehold Premises 6,750
Sales 24,750
Due from customers 4,770
Purchases 11,331
, Purchases Returns 2,376
Loan from Bank 2,304
Trade expenses 6,300
Trade Payable 4,752
Bills payable 900
Salaries and Wages 5,400
Cash at Bank 2,034
Opening Inventory (1.4.2023) 2,376
Rent and rates 4,167
Sales return 882
49,086 49,086
Reasons:
1. Due from customers is an asset, so its balance will be a debit
balance.
2. Purchases return account always shows a credit balance because
assets goes out.
3. Trade Payable is a liability, so its balance will be a credit balance.
4. Bills payable is a liability, so its balance will be a credit balance.
5. Inventory (opening) represents assets, so it will have a debit
balance.
6. Sales return account always shows a debit balance because assets
come in.
2. (a) Valuation of Physical Stock as at March 31, 2024
`
Stock at cost on 31st
December,2023 80,000
Add: (1) Undercasting of a page total 200
(2) Goods purchased and delivered
during January – March, 2024
` (70,000 – 3,000 + 4,000) 71,000
(3) Cost of sales return ` (1,000 – 200) 800 72,000
1,52,000
Less:(1) Overcasting of a page total 1,000
` (6,000 – 5,000)
(2) Goods sold and dispatched during
January – March, 2024
` (90,000 – 5,000 + 4,000) 89,000
25 ___
Less: Profit margin 89,000 17,800
125 71,200 72,200
Value of stock as on 31st March, 2024 79,800
Date of Paper: 31st December, 2026
Time of Paper: 10.30 A.M. to 1.30 P.M.
FOUNDATION COURSE
PAPER – 1: ACCOUNTING
ANSWERS
1. (a) (i) False: Depreciation is a charge against profit and not an
appropriation of profit. Therefore, depreciation has to be provided
for, even in case of loss in a financial year.
(ii) False: At the end of the accounting year, all the nominal accounts
of the ledger book are totalled and transferred to Profit & Loss A/c.
(iii) False: Amount spent for replacement of any worn- out part of a
machine is revenue expense since it is part of its maintenance cost.
(iv) False: In case of admission of new partner in a partnership firm,
profit/loss on revaluation account is transferred to old partners in
their old profit-sharing ratio.
(v) False: The debit notes issued are used to prepare purchases return
book.
(vi) False: Debentures Suspense Account appears on asset side of
Balance Sheet under Non-Current Asset.
(b) Accounting Standards are selected set of accounting policies or broad
guidelines regarding the principles and methods to be chosen out of
several alternatives. The Accounting Standards Board of the Institute of
Chartered Accountants of India (ICAI) formulates Accounting Standards
to be established by the Council of the ICAI. The main objective of
Accounting Standards is to establish standards which have to be
complied with, to ensure that financial statements are prepared in
accordance with generally accepted accounting principles. Accounting
Standards seek to suggest rules and criteria of accounting
measurements. These standards harmonize the diverse accounting
policies and practices at present in use in India.
(c) Corrected Trial Balance of Mr. Govind as on 31st March, 2024
Particulars Dr. Amount ` Cr. Amount `
Govind ’s Capital 14,004
Govind ’s Drawings 5,076
Leasehold Premises 6,750
Sales 24,750
Due from customers 4,770
Purchases 11,331
, Purchases Returns 2,376
Loan from Bank 2,304
Trade expenses 6,300
Trade Payable 4,752
Bills payable 900
Salaries and Wages 5,400
Cash at Bank 2,034
Opening Inventory (1.4.2023) 2,376
Rent and rates 4,167
Sales return 882
49,086 49,086
Reasons:
1. Due from customers is an asset, so its balance will be a debit
balance.
2. Purchases return account always shows a credit balance because
assets goes out.
3. Trade Payable is a liability, so its balance will be a credit balance.
4. Bills payable is a liability, so its balance will be a credit balance.
5. Inventory (opening) represents assets, so it will have a debit
balance.
6. Sales return account always shows a debit balance because assets
come in.
2. (a) Valuation of Physical Stock as at March 31, 2024
`
Stock at cost on 31st
December,2023 80,000
Add: (1) Undercasting of a page total 200
(2) Goods purchased and delivered
during January – March, 2024
` (70,000 – 3,000 + 4,000) 71,000
(3) Cost of sales return ` (1,000 – 200) 800 72,000
1,52,000
Less:(1) Overcasting of a page total 1,000
` (6,000 – 5,000)
(2) Goods sold and dispatched during
January – March, 2024
` (90,000 – 5,000 + 4,000) 89,000
25 ___
Less: Profit margin 89,000 17,800
125 71,200 72,200
Value of stock as on 31st March, 2024 79,800
