Subject Code QDB-47
COMMERCE AND ACCOUNTANCY (English Medium)
Time 3 Hours Total Marks 200
Instructions The question paper has been divided into three parts, B and C. The number of questions to be attempted and their marks are indicated in each part.

Answers of all the questions of each part should be written continuously in the answer sheet and should not be mixed with other parts' Answer. In the event of answer found, which are belongs to other part, such answers will not be assessed by examiner.


The candidate should write the answer within the limit of words prescribed in the parts B and C.


If there is any difference in English language question and its Gujarati Translation, then English language question will be considered as valid.


Answer should be written in one of the two languages. Write in the language (English or Gujarati) preference given by you. Answer should not be written in both the languages in the same paper.


Part-A Instructions Question No. 1 to 20.

Attempt all 20 questions.


Each question carries 2 marks.


Answer should be given approximately in 20 to 30 words.


1.
Explain the Materiality concept.

2.
Explain Matching Principle of accounting.

3.
State the adjustment entry for closing stock and prepaid expenses.

4.
A and B are partners sharing profit in the ratio of 7 3. They admit C for 2/10 share of profit which he takes equally from A and B. Calculate sacrificing ratio and new profit sharing ratio.

5.
In absence of partnership deed, state how the admission and retirement of the partners will be governed and what are the conditions for the same.

6.
If the opening balance of the debtors is 90,000; sales during the year is 13,20,000 and the closing balance of the debtors is 1,50,000; calculate the cash received from the debtors during the year.

7.
State the meaning of amalgamation adjustment account and when it is created.

8.
Following information is made available to you to compute purchase consideration


P Ltd. takes over Q Ltd. and agrees to issue 5 shares of 10 each at 20 for every 8 shares of Q Ltd. Total number of the fractional shares are 100.


Number of shares of Q Ltd. were 1,00,000 before takeover.




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9.
State the meaning of hire purchase agreement.

10.
State what is incomplete in 'Accounts from incomplete records'.

11.
State the meaning of purchase consideration as per AS-14.

12.
State the elements of cost.

13.
Define and illustrate cash and cash equivalents as used in the preparation of cash flow statement.

14.
Explain the meaning of Current ratio.

15.
State the meaning of 'Net Present Value' with reference to capital budgeting decision.

16.
What are IFRS

17.
Define 'Assessment year' under the Income Tax Act, 1961.

18.
State the provisions for exemption of House Rent Allowance under Income Tax Act, 1961.

19.
State the conditions for 'Resident and Ordinarily resident' for individual under Income Tax Act, 1961.

20.
State precisely the meaning of 'investigation'.


Part-B Instructions Question No. 21 to 32.

Attempt all 12 questions.


Each question carries 5 marks.


Answer should be given approximately in 50 to 60 words.


21.
State the meaning and purpose of Bank reconciliation statement.

22.
M Ltd. forfeited 500 shares of 10 each fully called up for non-payment of first call of 2.50 per share and final call of 2.50 per share. 300 of these shares were issued at 8 per share fully paid up. Pass the journal entries for forfeiture and reissue of shares.

23.
The following particulars are available in respect of the business


Year 2011-12 2012-13 2013-14 2014-15 2015-16
Profit 30,000 34,000 36,000 24,000 38,000

The above profit include non-recurring profit on an average basis of 2,000 per
annum.
Capital employed 2,40,000
Normal rate of return 12 percent

Calculate Value of goodwill as per five years purchase of super normal profit.
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24.
Differentiate between error of omission and error of commission.

25.
E Ltd., a manufacturer of product P has prepared the following cost details for the current financial year


Fixed Costs (in
Staff Salaries 12,00,000 Variable cost per unit 2,500 Office Costs 8,00,000 Selling Price per unit 4,000 Advertisement Costs 4,00,000
The company currently sells 2,400 units in the year. Calculate the current break-even
point and Margin of safety.
26. R Ltd., a sailboat manufacturer is currently operating at 70 percent capacity and producing about 10000 units a year. In order to use more capacity the manager has been considering the R D department's suggestion that R Ltd. should manufacture its own sails.
Currently the company purchases sails from the supplier at the unit price of 28. Estimates show that the company can manufacture the same at 10 per unit of direct material cost and 8 direct labour cost. The factory overheads are 2 per rupee of direct labour cost of which 20 percent is variable.
Advise Should the company make or buy the sails
27.
Explain the meaning of ratio analysis and two important liquidity ratios.

28.
Discuss the significance of Zero based budgeting.

29.
Discuss various aspects of 'Statutory Audit'.

30.
Discuss various aspects of 'Government Audit'.

31.
Municipal value of a house is 1,20,000; Fair rent is 1,80,000 and standard rent is 1,50,000. The house property was let out for 14,000 p.m. However, the tenant vacated the property on 30-10-2015. For the months of November 2015 to January 2016, the property remained vacant. It was let out for 18,000 p.m. with effect from 1-2-2016. Municipal taxes paid were 15% of municipal valuation. Compute the annual value of the house property.

32.
Mr. T receives following gifts during the previous year 2014-15


i. On the occasion of marriage Mr. T gets 2,90,000 as gift on 2-4-2014. (of this 1,50,000 is from friends and 1,40,000 from relatives).
ii. On 22-6-2014 he receives gift of 25,000 from Mr. cousin of his father.
iii. A computer received from his employer (it was purchased for 65,000 by the employer on 1-5-2014 and given as gift to Mr. T on 20-10-2014)
iv.
On 30-12-2014 Mr. T received by way of gift commercial property from the elder brother of the father in law (stamp duty value 25,00,000).

v.
On 25-1-2015 he purchases a work of art for 16,00,000 from an exhibition in New York. The Fair market value of the same on the date of purchase was 17,00,000.


Compute the chargeable gift.
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Part-C
Instructions Question No. 33 to 39.

Attempt any 5 out of 7 questions.


Each question carries 20 marks.


Answer should be given approximately in 200 words.


33. Following are the Balance Sheets of A Ltd. and B Ltd. as on 31-3-2016.
Capital Liabilities A Ltd. B Ltd.
Equity share Capital 10) 14% Preference share capital 100 each) General Reserve Export Profit Reserve Foreign Project Reserve Investment Allowance Reserve Surplus in the Statement of Profit Loss 12% Debentures (of 100 each) Trade Creditors 5,00,000 2,20,000 50,000 30,000 75,000 50,000 65,000 3,00,000 1,70,000 25,000 20,000 5,000 5,000 50,000 35,000 50,000
Total 9,90,000 6,60,000
Assets
Land Building 2,50,000 1,55,000
Plant Machinery 3,25,000 1,70,000
Furniture 57,500 35,000
Investments 1,25,000 95,000
Stock 90,000 1,03,000
Trade Debtors 72,500 52,000
Cash at Bank 70,000 50,000
Total 9,90,000 6,60,000

A Ltd. takeover B Ltd. on 1st April, 2016. A Ltd. discharges the purchase consideration as follows
Issued 35,000 equity shares of 10 each at par to equity share holders of B Ltd.
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Issued 15% preference shares of 100 each to discharge preference shareholders of
B Ltd. at 10% premium.
The Debenture holders of B Ltd. were taken over and then discharged by issue of
equivalent number of 12% Debentures of A Ltd.
Assume Statutory Reserves of B Ltd. (Export Profit Reserve, Foreign Project Reserve,
Investment Allowance Reserve) are to be maintained for two more years.
Prepare necessary ledger accounts to close the books of B Ltd. assuming that
amalgamation is in the nature of merger.

34. The product of a manufacturing concern passes through two processes, A and B and then to finished stock. It is ascertained that in each process of total weight is lost and 10% is scrap. The scrap from processes A and B realizes 80 per tonne and 200 per tonne respectively. The following are the figures relating to both the processes Process A Process B Materials (Tonne) 1000 70 Cost of material per tonne) 125 200 Wages 28,000 10,000 Manufacturing expenses(`) 8,000 5,250 Output (Tonnes) 830 780 Prepare the process cost accounts showing cost per tonne of each process. There was no opening stock or work-in-process in any process.
35. In a meeting held at Delhi towards the end of 2014-15, the directors of the company have taken a decision to diversify. At present the company sells all finished goods from its own warehouse. The company issued debentures on 1-4-2015 and purchased fixed assets on the same day. The purchase prices have remained stable during the concerned period. Following information is provided to you.
Income Statement Balance Sheet
Particulars 2014-15 2015-16
Cash Sales Credit Sales 30,000 2,70,000 3,00,000 32,000 3,42,000 3,74,000 2,98,000 76,000 59,000
Less Cost of Goods sold Gross Profit Less Expenses Warehousing Transport Administrative SellingInterest on Debentures 13,000 6,000 19,000 11,000 2,36,000 64,000 49,000 14,000 10,000 19,000 14,000 2,000
Net Profit 15,000 17,000
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Particulars As at 31-3-2015 As at 31-3-2016
Fixed Assets (Net Block) Debtors Cash at Bank Stock Total Current Asset 50,000 10,000 60,000 1,20,000 30,000 82,000 7,000 94,000 1,83,000 40,000
Creditors Total Current Liabilities 50,000 50,000 76,000 76,000
Working Capital (CA CL) Total Asset 70,000 1,00,000 1,07,000 1,47,000
Represented by Share Capital Reserves Surplus Debentures 75,000 25,000 75,000 42,000 30,000
1,00,000 1,47,000

You are required to compute the following ratios for the year 2014-15 and 2015-16.

Gross Profit Ratio


Operating Profit Ratio


Net Profit Ratio

Net Profit to Net worth


Capital Turnover Ratio


Stock Turnover Ratio


Debtors Collection period.
Ratios relating to capital employed should be based on the capital at the end of the year. Give reasons for change in ratios of two years. Assume opening stock of 40,000 for the year 2014-15. Ignore taxation.
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36. Mr. P (age 29 years) furnishes the following information relevant for the assessment year 2015-16
Profit and Loss Account for the year ending March 31, 2015
Particulars Particulars
Office Expenses Sundry Expenses Entertainment Expenditure Audit fees Legal Charges/Expenses Extension of Building Depreciation on Plant and Machinery Salary to Staff . Salary . Bonus Contribution towards . Employees' Recognized Provident Fund . Unapproved Gratuity Fund Sales tax Provision for Sales Tax Net Profit 45,000 39,000 10,000 15,000 8,000 6,000 23,000 50,000 36,000 15,000 4,000 38,000 25,000 5,82,600 Gross Profit Sundry Receipts Bad Debt Recovered (not allowed as deduction earlier) Customs duty recovered from the Government (earlier allowed as deduction) Gift received from father 8,03,000 11,000 7,100 32,500 43,000
Total 8,96,600 Total 8,96,600

Other information
i. Mr. P. purchases a plant of 30,000 for the purpose of carrying on scientific research related to his business. Neither cost of plant nor depreciation is debited to profit and loss account.
ii. Out of the bonus of 36,000, 4,000 was paid during 2014-15 and 26,000 is paid on 31st July, 2015 (being the due date for furnishing return of income). The balance of 6,000, however, paid on November 11, 2015.
iii. Depreciation on Plant and Machinery and extension of building as per income tax provision is 19,000.
iv. Sales tax of 38,000 includes interest for late payment of sales tax 1,200; Penalty for evading sales tax 10,000.
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v. Provision for sales tax represents an outstanding sales tax liability which is however
paid on July 10, 2015. Ascertain the Taxable Income of Mr. P for the Assessment Year 2015-16, assuming that he deposits 1,20,000 in Public Provident Fund account during the previous year 2014-15 and his income from other sources is 2,06,000.
37.
Elaborate on various aspects of appointment of the Company auditor in AGM, rotation of company auditors and re-appointment of retiring auditors.

38.
Discuss various aspects for preparation of the Consolidated Financial Statements.

39.
Discuss in detail the provision for deduction under section 80G regarding Donation under the Income Tax Act, 1961.