CWA ICWA Exam Papers Foundation Accounting Dec 2008
CWA ICWA Exam Papers Foundation
Accounting Dec 2008
This Paper has 57 answerable questions with 16 answered.
Time Allowed : 3 Hours Full Marks : 100
The figures in the margin on the right side indicate full marks.
Answer Question No. 1 which is compulsory and any two questions from Section I.
1. (a) In each of the following one of them is correct. Indicate the correct answer. 1×9
(i) Net assets represent excess of
(a) Total assets over total liabilities
(b) Paid–up capital over liabilities
(c) Expenditure over income
(d) Assets over Issued Capital
(ii) An entry of Rs. 5,400 has been debited to X’s account at Rs. 4,500. It is an error of
(d) Wrong posting
(iii) Prepaid expenses are shown as
(a) Miscellaneous expenditure
(b) Loans and advances
(d) Capital Expenditure
(iv) Noting charges are paid by
(a) The acceptor
(b) The payee
(c) The drawer
(d) The endorsee
(v) Overdraft as per cash book means
(a) Credit balance in the pass book
(b) Credit balance in the bank column of the cash book
(c) Debit balance in the pass book
(d) Debit balance in the cash book
(vi) Amount set a part to meet losses due to bad debt is a
(vii) The recognition that every transaction has two sides to it, is the leading principle of
(a) Accrual Concept
(b) Realisation Concept
(c) Dual Aspect Concept
(d) Matching Concept.
(viii) Statement of Affairs is a
(a) Statement of Income and Expenditure
(b) Statement of Assets and Liabilities
(c) Not a Financial Statement
(d) Statement of Loans and Advances.
(ix) Retiring of bill under Rebate
(a) Is settled before due date at a discount
(b) Is settled after maturity
(c) Is to get the period of bill extended
(d) Is a fresh bill after deduction of rebate.
(b) Fill in the blanks: 1×5
(i) Credit balance of the Pass Books indicates_________balance. (1)
(ii) The withdrawal of money by the owner of business is called_________. (1)
(iii) Effects of an event must be recognized in the same accounting period as per_________concept. (1)
(iv) Contingent Liability is a _________ item to the Balance Sheet. (1)
(v) Expenses paid but not accrured means_________expenses. (1)
(c) State with reasons whether the following statements are true or false: 2×8
(i) Debit balance of the Pass Books indicates an overdraft. (0)
(ii) Suspense Account always shows debit balance. (0)
(iii) An agent to whom goods are sent for sale on a commission basis in called a consignee. (0)
(iv) The trade discount is never entered in the books of accounts. (0)
(v) The business of partnership firm must be carried on by all the partners. (0)
(vi) Salary paid to Ram will be debited to Ram’s personal account. (0)
(vii) Sales day book is the summary of both cash and credit sales of the concern. (0)
(viii) A bill of exchange is a conditional order in writing given by a Debtor to a Creditor. (0)
2. (a) From the following particulars, prepare Bank Reconciliation Statement as on 30.11.08:
(i) Balance as per pass book (overdraft)
(ii) Cheque of Ajay Ltd. deposited but not presented
(iii) Cheque issued to Bijay Ltd. but not presented
(iv) Bank charges and commission not entered in cash book
(v) Amount directly credited by the bank against transfer of fund
(vi) Dividend credited by bank but not entered in cash book 5,000
(b) Define Contingent Liabilities 3 (0)
3. (a) Mr. A draws on Mr. B a bill of exchange for Rs. 5,000 on 1st January, 2008. Mr. A endorses the bill in favour of Mr. C. Before maturity, Mr. B approaches Mr. A with the request that the bill be renewed for a further period of 3 months at fifteen per cent interest per annum. Mr. A pays the sum to Mr. C on due date and agrees to the proposal of Mr. B. Pass the journal entries in the books of Mr. A assuming that the second bill is duly met. 6 (0)
(b) Define Accommodation Bill. 4 (0)
4. (a) One Lathe machine whose original value was Rs. 1,20,000 on 1.4.2006, being the date of installation, was sold on 30.9.2008 for Rs. 1,00,000. Depreciation is charged @ 10% on reducing balance. Show Machinery account and Assets disposal account. 6 (0)
(b) Explain Fundamental Accounting Assumption. 4 (0)
Answer Question No. 5 which is compulsory and
any two questions from Section II.
5. (a) In each of the following one of them is correct. Indicate the correct answer. 1×12
(i) Prime cost may be correctly termed as
(a) The sum of direct material and labour cost with all other costs excluded.
(b) The total of all cost items which can be directly charged to product units
(c) The total costs incurred in producing a finished unit
(d) The sum of the large cost terms in a product cost.
(ii) Which of the following does not usually appear on a GRN?
(a) Date received
(b) Quantity received
(c) Price of goods
(d) Description of goods.
(iii) From the following data production overhead absorption rate, as a percentage of prime cost:
Direct material cost: Rs. 3,000
Direct labour cost: Rs. 5,000
Direct expenses: Rs. 2,000
Production overhead: Rs. 20,000
(iv) Which of the following methods of remuneration is most likely to give stability of earnings to employee and stability of labour cost to employer:
(a) Straight piecework
(b) Premium bonus schemes
(c) Measured day work
(d) Group bonus scheme.
(v) Vacation pay for factory workers should be charged to
(a) Work–in–process inventory
(b) Direct labour
(c) Administrative expense
(d) Factory overhead
(vi) Apportionment of overhead cost may be defined as:
(a) Charge to a cost centre of an overhead cost item with no estimation.
(b) Charge each cost centre with a share of an overhead cost using an appropriate basis to estimate the benefit extracted by each cost centre.
(c) Charge to cost units for the use of an overhead cost.
(d) Classification of overhead cost as fixed or variable.
(vii) Which of the following indicates a breakeven point?
(a) Sales revenue – variable cost.
(b) Profit = fixed cost + variable cost
(c) Contribution = fixed cost
(d) Contribution + fixed cost = profit.
(viii) A factory operates on 300 days. It runs on 3 shifts of 7 hours each. Normally one hour everyday is spent on normal repair work. The number of hours for computation of machine hour rate will be:
(a) 6000 hours
(b) 6300 hours
(c) 2100 hours
(d) 6600 hours.
(ix) Existing sales are Rs. 1,00,000 (500 units), variable costs are Rs. 60,000 & fixed costs are Rs. 24,000. If selling price is reduce by 10%, the break–even sales of the company will be
(a) 400 units
(b) 334 units
(c) 500 units
(d) 450 units.
(x) Margin of Safety is:
(a) Fixed cost—Variable Cost
(b) Contribution—Fixed Cost
(c) BEP Sales—Variable Cost
(d) Sales—BEP Sales.
(xi) In situation of increasing price, the valuation of closing stock is less under:
(c) Simple average
(d) Weighted average.
(xii) An increase in fixed cost will result in
(a) A decrease in P/V Ratio
(b) Decrease in contribution per unit
(c) Increase in break even level
(d) Increase in profit.
(b) State with reasons whether the following statements are true or false: 2×9
(i) Under LIFO method, price of issues is close to current market price. (0)
(ii) Price rate system is useful when the quality of the product is extremely important. (0)
(iii) Variable cost per unit will not change. (0)
(iv) Cost centre is sometimes known as cost unit. (0)
(v) Abnormal costs are controllable. (0)
(vi) All overheads change with change in volume and in the same proportion. (0)
(vii) All packing materials are indirect, hence treated as factory overheads. (0)
(viii) Target cost is a product cost arrived at after deducting desired profit from the selling price prevailing in the market. (0)
(ix) Just in time means to complete all work just in time, without keeping anything pending for the next day. (0)
6. (a) ABC Ltd. furnished information in relation to the production of 2,000 units of product “X” for the year 2007.
(vi) Direct materials
Indirect wages (50% fixed)
Consumable Stores (70% variable)
Office rent (100% fixed)
Selling expenses (40% variable) 2,00,000
In the year 2008, it is estimated that the production will increase by 50%. The price of material and labour will up by 10% and 20% respectively.
Compute selling price per unit of product “X” for the year 2008, if the company wishes to maintain the profit @ 10% on cost.
(b) Write note on “Idle Time”. 3 (0)
7. (a) A Contractor uses labour groups of two skilled and three unskilled workers to do small contract jobs. The contractor wishes to charge the work done by this group on an hourly basis. The information for the group is as follows:
One Skilled Worker One Unskilled Worker
Working hours per week
Normal idle time 40
10% of working hours
Three weeks on full pay plus
bonus of Rs. 2000 per annum 40
10% of working hours
Three weeks on full pay
Wages rate per hour
Food Allowance per working week
Lodging allowance per working week
Non–contributory pension fund—employer’s
payment per annum Rs. 24
Rs. 1,060 Rs. 16
You are required to calculate labour hour rate for the group, assuming fifty–two weeks per year.
(b) Write note on “Cost–Volume–Profit (CVP) Analysis. 4 (0)
8. (a) Calculate Economic order quantity from the following:
Price per kg.
Inventory Holding Cost 16000 kg.
Rs. 50 per order
5% on average inventory
Minimum lead time 200 units
What is the Minimum Stock? (0)
(c) The number of employees at the beginning and end of 2007 were 2500 & 3500 respectively. During the year 2007, 250 employees left and 350 persons joined the company. Calculate the labour turnover ratio under Flux Method. (0)
(d) You are required to find out the break even sales (BES) and profit, it the sales of a company are Rs. 50 lakhs and P/V ratio and margin of safety are 50% and 40% respectively. (0)