C.A. IPCC
First Study
Subject: Accounting
Instructions :
(i) All questions are compulsory.
(ii) Date of Examination : 17.02.2010
(iii) Total Number of Questions : 6
(iv) Total marks : 100
(v) Total duration : 3 Hours
(vi) Use of two colour pens (black & blue or Black or Pink etc) is NOT allowed. Use only
single colour pen.
(vii) Begin answer of the next question in new page.
, Question 1.Answer the following questions:
(i) In self balancing system, whenever a balance is transferred from an account in on e ledger to that in
another, only one entry is recorded through the respective ledger. State with reason whether the statement is
true or false.
Answer. False- Whenever a balance is transferred from one account in one ledger to that in another, the
entry is recorded through the journal. Also an additional entry is made in the control accounts for recording
the corresponding effect.
(ii) Explain Garner v/s Murray rule applicable in the case of partnership firms. State, when is this rule not
applicable.
Answer. Garner vs. Murray rule requires-
1.That the solvent partners should bear the loss arising due to insolvency of a partner in their capital ratio
after making adjustments for past accumulated reserves, profits or losses, drawings, interest on
drawings/capitals, remuneration to partners etc, to the date of dissolution but before making adjustment for
profit or loss on realization in case of fluctuating capital. In case of fixed capital no such adjustments
required.
2. That the solvent partners should bring in cash equal to their respective shares of the loss on realization.
This rule is not applicable when:
a) Only one partner is solvent.
b) All partners are insolvent.
c)The Partnership deed provides for a specific method to be followed in case of insolvency of a partner,
then the conditions in the deed would prevail.
(iii) Explain the ‘Accounting for Revaluation of fixed assets’ with reference to AS 10.
Answer. An increase in net book value arising on revaluation of fixed assets is normally credited
directly to revaluation reserves and is not available for distribution. A decrease in net book value arising on
revaluation of fixed assets is charged to P & L statement except that, to the extent that such a decrease is
considered to be related to a previous increase on revaluation that is included in revaluation reserve, it is
sometimes charged against that earlier increase. It sometimes happens that an increase to be recorded is
a reversal of a previous decrease arising on revaluation which has been charged to profit and loss
statement in which case the increase is credited to profit and loss statement to the extent that it offsets the
previously recorded decrease.
(iv) If there appears a sports fund, the expenses incurred on sports activities will be taken to income
and expenditure account. State whether the statement is true or false.
Answer. False- If there exists a specific sports fund, the expenditure incurred in carrying out the purpose of
the fund i.e. incurred on sports activities will be deducted from that fund only.
(v) A Ltd. take over B Ltd. on April 01, 2007 and discharges consideration for the business as
follows:
(a) Issued 42,000 fully paid equity shares of Rs. 10 each at par to the equity shareholders of B Ltd.
(b) Issued fully paid up 15% preference shares of Rs. 100 each to discharge the preference shareholders
(Rs. 1,70,000) of B Ltd. at a premium of 10%.
(c) It is agreed that the debentures of B Ltd. (Rs. 50,000) will be converted into equal number and amount
of 13% debentures of A Ltd.
Calculate the amount of purchase consideration.
Answer.
Particulars Rs. Rs.
Equity Shares (42,000 x 10) 4,20,000
Preference Share Capital 1,70,000
Add: Premium on Redemption (10% on 1,70,000) 17,000 1,87,000
Purchase Consideration 6,07,000
First Study
Subject: Accounting
Instructions :
(i) All questions are compulsory.
(ii) Date of Examination : 17.02.2010
(iii) Total Number of Questions : 6
(iv) Total marks : 100
(v) Total duration : 3 Hours
(vi) Use of two colour pens (black & blue or Black or Pink etc) is NOT allowed. Use only
single colour pen.
(vii) Begin answer of the next question in new page.
, Question 1.Answer the following questions:
(i) In self balancing system, whenever a balance is transferred from an account in on e ledger to that in
another, only one entry is recorded through the respective ledger. State with reason whether the statement is
true or false.
Answer. False- Whenever a balance is transferred from one account in one ledger to that in another, the
entry is recorded through the journal. Also an additional entry is made in the control accounts for recording
the corresponding effect.
(ii) Explain Garner v/s Murray rule applicable in the case of partnership firms. State, when is this rule not
applicable.
Answer. Garner vs. Murray rule requires-
1.That the solvent partners should bear the loss arising due to insolvency of a partner in their capital ratio
after making adjustments for past accumulated reserves, profits or losses, drawings, interest on
drawings/capitals, remuneration to partners etc, to the date of dissolution but before making adjustment for
profit or loss on realization in case of fluctuating capital. In case of fixed capital no such adjustments
required.
2. That the solvent partners should bring in cash equal to their respective shares of the loss on realization.
This rule is not applicable when:
a) Only one partner is solvent.
b) All partners are insolvent.
c)The Partnership deed provides for a specific method to be followed in case of insolvency of a partner,
then the conditions in the deed would prevail.
(iii) Explain the ‘Accounting for Revaluation of fixed assets’ with reference to AS 10.
Answer. An increase in net book value arising on revaluation of fixed assets is normally credited
directly to revaluation reserves and is not available for distribution. A decrease in net book value arising on
revaluation of fixed assets is charged to P & L statement except that, to the extent that such a decrease is
considered to be related to a previous increase on revaluation that is included in revaluation reserve, it is
sometimes charged against that earlier increase. It sometimes happens that an increase to be recorded is
a reversal of a previous decrease arising on revaluation which has been charged to profit and loss
statement in which case the increase is credited to profit and loss statement to the extent that it offsets the
previously recorded decrease.
(iv) If there appears a sports fund, the expenses incurred on sports activities will be taken to income
and expenditure account. State whether the statement is true or false.
Answer. False- If there exists a specific sports fund, the expenditure incurred in carrying out the purpose of
the fund i.e. incurred on sports activities will be deducted from that fund only.
(v) A Ltd. take over B Ltd. on April 01, 2007 and discharges consideration for the business as
follows:
(a) Issued 42,000 fully paid equity shares of Rs. 10 each at par to the equity shareholders of B Ltd.
(b) Issued fully paid up 15% preference shares of Rs. 100 each to discharge the preference shareholders
(Rs. 1,70,000) of B Ltd. at a premium of 10%.
(c) It is agreed that the debentures of B Ltd. (Rs. 50,000) will be converted into equal number and amount
of 13% debentures of A Ltd.
Calculate the amount of purchase consideration.
Answer.
Particulars Rs. Rs.
Equity Shares (42,000 x 10) 4,20,000
Preference Share Capital 1,70,000
Add: Premium on Redemption (10% on 1,70,000) 17,000 1,87,000
Purchase Consideration 6,07,000
