CA CPT Accounting Fundamentals

Let the total commission payable to consignee = Rs. X
X = 415000*3% + 20% *(4,15,000 - 3,75,000 - X)
X = Rs. 17,042
The correct option is (1).

The income tax on his personal income should be debited to proprietor's capital account due to personal expenditure of the proprietor treated as drawings of the proprietor.

Negotiable instrument is an unconditional order to pay a certain sum of money to the payee by the payer at a specified future date, which is transferable. Bill of exchange, bearer cheque, demand draft and promissory note are transferable and unconditional orders. Correct option is 4 (crossed cheque, i.e., account payee cheque).

The undervaluation of opening stock will result in the decrease in the cost of goods sold and increase in the gross profit. The correct option is option (5).

As per AS - 2 valuation of inventories, FIFO and average method are methods of valuation of inventories. The LIFO (Last in first out method), HIFO (Highest In first out method) and NIFO (Next in first out method) are recognized by the AS - 2 valuation of inventories.

The flats constructed by the real estate developers for sale are held as stock in trade. So, these are treated as inventories as per AS-2 “Valuation of Inventories”.

Cash deposited into bank credited from cash book, cash received from debtors, but deposited into bank on the next day and cash withdrawn from bank for office use are contra entry transactions.

The noting and protesting charges are paid by the drawer on the dishonour of bills of exchange.

As per AS -11 “The effects of changes in foreign exchange rates“ in case of foreign operations, the foreign exchange difference on translation of trial balance in indian currency shall be transferred to the profit and loss account.

While preparing cash flow statements, the capital gain tax on sale of land shall be reduced from the cash flows from investing activities as per AS - 2 “Cash Flow Statements”.

In case of fixed capital method, all the adjustments are to be made in the partner's current account. So, interest on partner's capital is debited to partner's current account.

The due date of payment in case of public holiday on maturity date of a sight bill after inclusion of grace days shall be the preceding date of due date for payment. The correct option is (3). The due date of payment shall be on the previous day.

As per AS - 5 net profits, prior period Items and changes in accounting policies issued by the ICAI, the extraordinary items are those items, which are incomes or expenses that we do not expect to re-occur in future.
The insurance claim received on loss of stock by fire, and the loss of land and building due to earthquake are extraordinary items.

The share of goodwill of retiring partner is debited to the remaining partner's capital a/c in gaining ratio among the remaining partners.

The payment of Rs. 2,00,000 paid by the purchaser at the time of purchase of building to vacate the tenant shall be capitalized and added to the cost of the building as per the AS - 10 ”Accounting to Fixed Assets”.

On account of debiting accrued interest on investments, the interest on investment account shall be credited. The correct option is (2).

The company is following FIFO method of valuation of inventories from year to year basis on compliance with the fundamental accounting assumption of consistency. The correct option is (5).

In case of any public holiday on the due date of bill to be matured including 3 days of grace period, the due date of maturity shall be the preceeding date of the normal due date. The normal due date including 3 days of grace is 02 May, 2012 in this case.  Due to public holiday on 02 May, 2012, the final due date of bill to be matured shall be 01 May, 2012.

NACAS (National Advisory Committee on Accounting Standards) had been formed in India on 07.12.2006. It was formed to give consultation to central government in prescribing the accounting standards for companies. The correct option is (5), i.e. 2006.

As per section 4 of Companies Act, 1956, the company jointly under the control of two companies is subsidiary company of parent company that is a subsidiary company of main parent company. M Ltd. is the parent company in this case. M Ltd. and O Ltd. is holding subsidiary relationship between each other. The correct option is (2). This is not a joint venture because O Ltd. is not under the joint control of M Ltd. and N Ltd.

As per section 617 of Companies Act, 1956, the company in which not less than 51% of the paid-up capital is held by central government or State Government, jointly or separately, is called government company. The subsidiary of a government company is called as government company whether public company or private company, and the government company being a private company is not required to use the word Pvt. Limited at the end of the name of the company. The correct option is (5).

        <span style="text-align:">A&apos;s contribution = 12000*2/3 = Rs. 8000</span>
        <span style="text-align:">B&apos;s contribution = Rs. 12000*1/3 = Rs. 4000</span>|&#xA0;|

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Kamal shall be the payee in this case because he will receive the amount of bill on encashment of bill of Rs. 5600.

        The rectifying Entry is</div>            |&#xA0;|&#xA0;|&#xA0;|

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The correct option is (3).