Chartered Accountancy- Integrated professional competence course examination- Group I

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1. (i) On 1st*April, 2008, Chhotu started business with an initial Capital of Rs.70,000. On 1st*October, 2008, he introduced additional capital of Rs.40,000. On 7th*of every month, he withdraws Rs.5,000 for household expenses. On 31st*March, 2009 his*Assets*and*Liabilities*were Rs.2,00,000 and Rs.70,000 respectively.
Ascertain the profit earned by Chhotu during the year ended 31st*March, 2009. 10x2=20 (0)
* (ii) Year to year results of a company were not found comparable on the basis of gross profit margin. List out the probable reasons. * (0)
* (iii) MY Ltd. had acquired 200 equity shares of YZ Ltd. at Rs.105 per share on 01.01.2009 and paid Rs.200 towards brokerage, stamp duty and STT. On 31st*March, 2009, shares of YZ Ltd. were traded at Rs.110 per share. At what value investment is to be shown in the Balance Sheet of MY Ltd. as at 31st*March, 2009. * (0)
* (iv) On 1st*April, 2008, X, Y and Z enter into partnership introducing capital of Rs.80,000, Rs.50,000 and Rs.50,000 respectively. They agree to share Profits and Losses equally. At the end of the accounting year on 31st*March, 2009, X claims that he be paid interest on his additional Capital of Rs.30,000 @ 10% per annum, while Z demands salary of Rs.600 per month for the extra hours devoted by him daily at the shop. The partnership deed is silent on these matters.*
Decide the matters with reasons. * (0)
* (v) What are the basic characteristics of a Private Ltd. Company? * (0)
* (vi) Sumo Ltd. has a profit of Rs.25 lakhs before charging depreciation for financial year 2008–09. Depreciation in the books was Rs.11 lakhs and depreciation chargeable under Section 205 comes to Rs.17 lakhs. Compute divisible profit for the year. * (0)
* (vii) From the following data, find out value of inventory as on 30.04.2009 using (a)*LIFO*method, and (b) FIFO method:

(1)
(2)
(3)
(4) 01.04.2009 Purchased
06.04.2009 Sold
09.04.2009 Purchased
18.04.2009 Sold 10 units @ Rs.70 per unit
6 units @ Rs.90 per unit
20 units @ Rs.75 per unit
14 units @ Rs.100 per unit
* (0)
* (viii) Explain contract costs as per Accounting Standard–7 related to ‘Construction Contracts’. * (0)
* (ix) Omshanti Club has 500 members with annual fee of Rs.1,000 per member. At the end of the accounting year, accountant noticed that 40 members have not paid annual fee and 70 members had paid fee in advance. Help the accountant to compute cash receipts of annual fee for the year. * (0)
* (x) The Companies Act, 1956 limits the payment of managerial remuneration. What is the maximum managerial remuneration, which can be paid in case of a company consistently earning profits and has more than one managerial person? * (0)
2. The following are the Balance Sheets of M Ltd. and N Ltd. as at 31st*March, 2009:

* (Rs. in lakhs)
Liabilities M Ltd. N Ltd.
Fully paid equity shares of Rs.10 each
10% preference shares of Rs.10 each, fully paid up
Capital Reserve
General Reserve
Profit*and*Loss*Account
8% Redeemable debentures of Rs.1,000 each
Trade Creditors
Provisions 3,600
1,200
600
2,100
780
–
2,421
870 900
–
–
–
–
300
369
93
* 11,571 1,662
Assets
Plant and Machinery
Furniture and Fixtures
Motor Vehicles
Stock
Sundry Debtors
Cash at Bank
Preliminary Expenses
Discount on Issue of Debentures
4,215
2,400
–
2,370
1,044
1,542
–
–
468
183
51
444
237
240
33
6
* 11,571 1,662
A new Company MN Ltd. was incorporated with an authorised capital of Rs.15,000 lakhs divided into shares of Rs.10 each. For the purpose of amalgamation in the nature of merger, M Ltd. and N Ltd. were merged into MN Ltd. on the following terms:

(i) Purchase consideration for M Ltd.’s business is to be discharged by issue of 120 lakhs fully paid 11% preference shares and 720 lakhs fully paid equity shares of MN Ltd. to the preference and equity shareholders of M Ltd. in full satisfaction of their claims.
(ii) To discharge purchase consideration for N Ltd.’s business, MN Ltd. to allot 90 lakhs fully paid up equity shares to shareholders of N Ltd. in full satisfaction of their claims.
(iii) Expenses on the liquidation of M Ltd. and N Ltd. amounting to Rs.6 lakhs are to be borne by MN Ltd.
(iv) 8% redeemable debentures of N Ltd. to be converted into 8.5% redeemable debentures of MN Ltd.
(v) Expenses on incorporation of MN Ltd. were Rs.15 lakhs.
You are requested to:
(a) Pass necessary Journal Entries in the books of MN Ltd. to record above transactions, and
(b) Prepare Balance Sheet of MN Ltd. after merger.
16 (0)
3. E, F and G were partners sharing Profits and Losses in the ratio of 5:3:2 respectively. On 31st*March, 2009 Balance Sheet of the firm stood as follows:

Liabilities Rs. Assets Rs.
Capital A/cs

E
F
G 50,000
40,000
28,000
Creditors
Outstanding Expenses


1,18,000
33,500
1,700 Buildings
Furniture
Stock
Debtors
Cash at Bank 55,000
25,000
42,000
20,000
11,200
* 1,53,200 * 1,53,200
On 31st*March, 2009, E decided to retire and F and G decided to continue as equal partners. Other terms of retirement were as follows:

(i) Building be appreciated by 20%.
(ii) Furniture be depreciated by 10%
(iii) A provision of 5% be created for bad debts on debtors.
(iv) Goodwill be valued at two years’ purchase of profit for the latest accounting year. The firm’s Profit for the year ended 31st*March, 2009 was Rs.25,000. No goodwill account is to be raised in the books of accounts.
(v) Fresh capital be introduced by F and G to the extent of Rs.10,000 and Rs.35,000 respectively.
(vi) Out of sum payable to retiring partner E, a sum of Rs.45,000 be paid immediately and the balance be transferred to his loan account bearing interest @ 12% per annum. The loan is to be paid off by 31st March, 2011.
One month after E’s retirement, F and G agreed to admit E’s son H as a partner with one–forth share in Profits/Losses. E agreed that the balance in his loan account be converted into H’s Capital. E also agreed to forgo one month’s interest on his loan.
It was also agreed that H will bring in, his share of goodwill through book adjustment, valued at the price on the date of E’s retirement. No goodwill account is to be raised in the books.
You are requested to pass necessary Journal Entries to give effect to the above transactions and prepare Partners’ Capital Accounts. 16 (0)
4. (a) A fire broke out in the godown of a business house on 8th July, 2009. Goods costing Rs.2,03,000 in a small sub-godown remain unaffected by fire. The goods retrieved in a damageed condition from the main godown were valued at Rs.1,97,000.
The following particulars were available from the books of accounts:
Stock on the last Balance Sheet date at 31st*March, 2009 was Rs.15,72,000. Purchases for the period from 1st*April, 2009 to 8th*July, 2009 were Rs.37,10,000 and sales during the same period amounted to Rs.52,60,000. The average gross profit margin was 30% on sales.
The business house has a fire insurance policy for Rs.10,00,000 in respect of its entire stock. Assist the Accountant of the business house in computing the amount of claim of loss by fire. 8 (0)
* (b) A trader allows his customers, credit for one week only beyond which he charges interest @ 12% per annum. Anil, a customer buys goods as follows:

Date of Sale/Purchase Amount (Rs.)
January 2, 2009
January 28, 2009
February 17, 2009
March 3, 2009 6,000
5,500
7,000
4,700
Anil settles his account on 31st*March, 2009. Calculate the amount of interest payable by Anil using average due date method. 8 (0)
5. (a) The Income and Expenditure Account of City Sports Club for the year ended 31st*March, 2009 was as follows:

Expenditure Amount (Rs.) Income Amount (Rs.)
To
To
To

To

To
To
To
To

To Salaries
Printing and Stationery
Rent

Repairs

Sundry Expenses
Annual Dinner Expenses
Interest to Bank
Depreciation on Sports
equipment
Excess of Income over
Expenditure 1,20,000
6,000
12,000

10,000

8,000
30,000
6,000
6,000


12,000 By
By
By

By Subscriptions
Entrance Fees
Contribution for Annual
dinner
Profit on Annual Sports
meet 1,60,000
10,000
20,000

20,000
* 2,10,000 * 2,10,000
The above account had been prepared after the following adjustments:

* Rs.
Subscriptions outstanding on 31.03.2008
Subscriptions received in advance on 31.03.2008
Subscriptions received in advance on 31.03.2009
Subscriptions outstanding on 31.03.2009 12,000
9,000
5,400
15,000
Salaries outstanding at the beginning and at the end of the financial year were Rs.8,000 and Rs.10,000 respectively. Sundry expenses included prepaid*insurance*expenses*of Rs.1,200.
The Club owned a freehold ground valued Rs.2,00,000. The Club has sports equipment on 01.04.2008 valued at Rs.52,000. At the end of the year, after depreciation, the sports equipment amounted to Rs.54,000. The Club raised a loan of Rs.40,000 from a bank on 01.01.2008, which was unpaid till 31.03.2009. On 31.03.2009, cash in hand was Rs.32,000.
Prepare Receipts and Payments account of the Club for the year ended 31st*March, 2009 and Balance Sheet as on that date. 10 (0)
* (b) Rama Udyog Limited was incorporated on August 1, 2008. It had acquired a running business of Rama & Co. with effect from April 1, 2008. During the year 2008–09, the total sales were Rs.36,00,000. The sales per month in the first half year were half of what they were in the later half year. The net profit of the company, Rs.2,00,000 was worked out after charging the following expenses:
(i) Depreciation Rs.1,08,000, (ii) Audit fees Rs.15,000, (iii) Directors’ fees Rs.50,000, (iv) Preliminary expenses Rs.12,000, (v) Office expenses Rs.78,000, (vi) Selling expenses Rs.72,000 and (vii) Interest to vendors upto August 31, 2008 Rs.5,000.
Please ascertain pre-incorporation and post–incorporation profit for the year ended 31st*March, 2009. 6 (0)
6. Answer any*four*of the following: 4x4=16 *
* (i) Market is full of ready–made accounting softwares. What factors will you consider to choose one of them for your enterprise? * (0)
* (ii) As per Accounting Standard–14, what are the conditions which must be satisfied for an amalgamation in the nature of merger? * (0)
* (iii) What do you mean by Customised Accounting Software? * (0)
* (iv) Rose Ltd. had made an investment of Rs.500 lakhs in the equity shares of Nose Ltd. on 10.01.2009. The realisable value of such investment on 31.03.2009 became Rs.200 lakhs as Nose Ltd. lost a case of patent rights. Rose Ltd. follows financial year as accounting year. How will you recognize this reduction inFinancial*statements*for the year 2008–09. * (0)
* (v) A company provided Rs.10,00,000 for dividend payment. Is the Corporate Dividend Tax payable in this case? If yes, please compute Corporate Dividend Tax assuming rate of 15% plus surcharge of 10% and disclose as it would appear in profit and loss account of the company. * (0)
* (vi) SAD Enterprises, a partnership firm, had purchased business of SWAD enterprises on 01.04.2008 and paid Rs.50,000 towards goodwill. On 01.04.2009, SAD enterprises decided to admit W as partner and the goodwill was valued at Rs.1,00,000 for the purpose.*
Please explain with reasons, at what price goodwill can be shown in the books of account. * (0)


1. (i) A and B are partners in a firm sharing profits and losses in the ratio of 3 : 2. Their capitals are Rs. 60,000 and Rs. 40,000 respectively. They admit C as a new partner who will get 1/6th share in the profit of the firm. C brings in Rs. 25,000 as his capital. Find out the amount of goodwill on the basis of the above information. 10x2=20 (0)
* (ii) From the following, calculate the cash price of the asset:

Rs.
Hire purchase price of the asset
Down payment
Four annual installments at the end of each year
Rate of interest 50,000
10,000
10,000
5% p.a
* (0)
* (iii) Mr. X purchased 1,000, 6% Government Bonds of Rs. 100 each on 31st January, 2009 at Rs. 95 each.Interest is payable on 30th June and 31st December. The price quoted is cum interest. Journalise the transaction. * (0)
* (iv) Swaminathan owed to Subramanium the following sums :

Rs. 5,000 on 20th January, 2009
Rs. 8,000 on 3rd March, 2009
Rs. 6,000 on 5th April, 2009
Rs. 11,000 on 30th April, 2009
Ascertain the average due date.
* (0)
* (v) A company acquired a machine on 1.4.2006 for Rs. 5,00,000. The company charged depreciation upto 2008–09 on straight line basis with estimated working life of 10 years and*scrap*value*of Rs. 50,000. From 2009–10, the company decided to change depreciation method at 20% on reducing balance method. Compute the amount of depreciation to be debited to*Profit*and*Loss*Account*for the year 2009–10. * (0)
* (vi) An unquoted long–term investment is carried in the books at cost of Rs. 2 lacs. The published accounts of unlisted company received in May, 2009 showed that the company has incurred cash losses with decline market share and the long–term investment may not fetch more than Rs. 20,000. How you will deal with it in the*financial*statement*of investing company for the year ended 31.3.2009? * (0)
* (vii) In the absence of a partnership deed, what will be your decision in disputes amongst partners regarding the following matters:

(a) Profit sharing ratio;
(b) Interest rate, at which interest is to be allowed to a partner, on loan given to the firm by a partner.
* (0)
* (viii) According to*Accounting*Standard*9, when revenue from sales should be recognised? * (0)
* (ix) In January, 2010 a firm took an insurance policy for Rs. 60 lakhs to insure goods in its godown against fire subject to average clause. On 7th March, 2010 a fire broke out destroying goods costing Rs. 44 lakhs. Stock in the godown was estimated at Rs.80 lakhs. Compute the amount of insurance claim. * (0)
* (x) On 1st April, 2009 a car company sold to Arya Bros., a motor car on hire–purchase basis. The total hire–purchase price was Rs. 4,60,000 with down payment of Rs. 1,60,000. Balance amount was to be paid in three annual installments of Rs. 1,00,000 each. The first installment payable on 31st March, 2010. The cash price of the car was Rs. 4,00,000.
How will Arya Bros. account for interest over three accounting years assuming books of accounts are closed on 31st March every year. * (0)
2. An analysis of the cash book revealed the following:

31.3.2008
Rs. 31.3.2009
Rs.
Furniture & fixtures
Stock
Debtors
Cash in hand & bank
Creditors
Bills payable
Outstanding salaries 2,60,000
2,45,000
1,25,000
1,10,000
1,35,000
70,000
19,000 2,34,000
3,20,000
?
?
1,90,000
80,000
20,000
An analysis of the cash book revealed the following:

31.3.2009
Rs.
Cash sales
Collection from debtors
Discount allowed to debtors
Cash purchases
Payment to creditors
Discount received from creditors
Payment for bills payable
Drawings for domestic expenses
Salaries paid
Rent paid
Sundry trade expenses 16,20,000
10,58,000
20,000
6,15,000
9,73,000
32,000
4,30,000
1,20,000
2,36,000
1,32,000
81,000
Depreciation is provided on furniture & fixtures @10% p.a. on diminishing balance method. Ruk Ruk Maan maintains a steady gross profit rate of 25% on sales.*
You are required to prepare Trading and Profit and Loss account for the year ended 31st March, 2009 and Balance Sheet as on that date. 16 (0)
3. The Balance Sheet of Reckless Ltd. as on 31st March, 2008 is as follows:

Rs.
Assets:
Freehold premises
Machinery
Furniture & fittings
Stock
Sundry debtors
Less : Provision for doubtful debts
Cash in hand
Cash at bank
Bills receivable




80,000
4,000
2,20,000
1,77,000
90,800
3,87,400

76,000
2,300
1,56,500
15,000
11,25,000
Liabilities:
60,000 Equity shares of Rs. 10 each
Pre–incorporation profit
Contingency reserve
Profit and loss appropriation account
Acceptances
Creditors
Provision for income–tax
6,00,000
21,000
1,35,000
1,26,000
20,000
1,13,000
1,10,000
11,25,000
Careful Ltd. decided to take over Reckless Ltd. from 31st March, 2008 with the following assets at value noted against them :

Rs.
Bills receivable
Freehold premises
Furniture and fittings
Machinery
Stock 15,000
4,00,000
80,000
1,60,000
3,45,000
¼ of the consideration was satisfied by the allotment of fully paid preference shares of Rs. 100 each at par which carried 13% dividend on cumulative basis. The balance was paid in the form of Careful Ltd.’s equity shares of Rs. 10 each, Rs. 8 paid up.
Sundry Debtors realised Rs. 79,500. Acceptances were settled for Rs. 19,000. Income–tax authorities fixed the taxation liability at Rs. 1,11,600. Creditors were finally settled with the cash remaining after meeting liquidation expenses amounting to Rs. 4,000.*
You are required to :

(i) Calculate the number of equity shares and preference shares to be allotted by Careful Ltd. in discharge of consideration.
(ii) Prepare the important ledger accounts in the books of Reckless Ltd.; and
(iii) Pass journal entries in the books of Careful Ltd. with narration
16 (0)
4. (a) Easilife Ltd. has a hire-purchase department which fixes hire-purchase price by adding 40% to the cost of the goods. The following additional information is provided to you :

Rs.
On 1st April, 2009 :
Goods out on hire-purchase (at hire-purchase price)
Instalments due
Transactions during the year :
Hire-purchase price of goods sold
Instalments received
Value of goods repossessed due to defaults
(hire-purchase installments unpaid Rs. 5,600)
On 31st March, 2010:
Goods out on hire-purchase (at hire-purchase price)
2,10,000
14,000

9,80,000
8,12,000

7,800

3,78,000
You are required to prepare Hire–purchase Trading Account, ascertaining the profit made by the department during the year ended 31st*March, 2010. 10+6=16 (0)
* (b) Gaama Investment Company holds 1,000, 15% debentures of Rs. 100 each in Beta Industries Ltd. as on April 1, 2009 at a cost of Rs. 1,05,000. Interest is payable on June, 30 and December, 31 each year.
On May 1, 2009, 500 debentures are purchased cum–interest at Rs. 53,500. On November 1, 2009, 600 debentures are sold ex–interest at Rs. 57,300. On November 30, 2009, 400 debentures are purchased ex-interest at Rs, 38,400. On December 31, 2009, 400 debentures are sold cum–interest for Rs. 55,000.
Prepare the investment account showing value of holdings on March 31, 2010 at cost, using FIFO method. * (0)
5. (a) On the basis of the following informations, prepare Income and Expenditure Account for the year ended 31st March, 2010 :

Receipts and Payments Account for the year ended 31st March, 2010
Receipts Rs. Payments Rs.
To Cash in hand (opening)
To Cash at bank (opening)
To Subscriptions
To Interest on 8% Government bonds
To Bank interest 1,300
3,850
4,94,700
4,000
160 By Salaries
By Rent
By Printing & stationery
By Conveyance
By Scooter purchased
By 8% Government bonds
By Cash in hand (closing)
By Cash at bank (closing) 2,58,000
71,500
3,870
10,600
50,000
1,00,000
840
9,200
5,04,010 5,04,010
(i) Salaries paid includes Rs. 6,000 paid in advance for April, 2010. Monthly salaries paid were Rs. 21,000.
(ii) Outstanding rent on 31st March, 2009 and 31st March, 2010 amounted to Rs. 5,500 and Rs. 6,000 respectively.
(iii) Stock of printing and stationery material on 31st March, 2009 was Rs. 340; it was Rs. 365 on 31st March, 2010.
(iv) Scooter was purchased on 1st October, 2009. Depreciation @ 20% per annum is to be provided on it.
(v) Investments were made on 1st April, 2009.
(vi) Subscriptions due but not received on 31st March, 2009 and 31st March, 2010 totalled Rs. 14,000 and Rs. 12,800 respectively. On 31st March, 2010, subscriptions amounting to Rs. 700 had been received in advance for April, 2010.
8+8=16 (0)
* (b) The following particulars relate to Bee Ltd., for the year ended 31st March, 2010 :

(i) Furniture of book value of Rs. 15,500 was disposed off for Rs. 12,000.
(ii) Machinery costing Rs. 3,10,000 was purchased and Rs. 20,000 were spent on its erection.
(iii) Fully paid 8% preference shares of the face value of Rs. 10,00,000 were redeemed at a premium of 3%. In this connection 60,000 equity shares of Rs. 10 each were issued at a premium of Rs. 2 per share. The entire money being received with applications.
(iv) Dividend was paid as follows:

On 8% preference shares
On equity shares for the year 2009–10 Rs. 40,000
Rs. 1,10,000

(v) Total sales were Rs. 32,00,000 out of which cash sales were Rs. 11,50,000.
(vi) Total purchases were Rs. 8,00,000 including cash purchase of Rs. 60,000.
(vii) Total expenses were Rs. 12,40,000 charged to Profit and Loss A/c.
(viii) Taxes paid including dividend distribution tax of Rs.22,500 were Rs.3,30,000.
(ix) Cash and cash equivalents as on 31st March, 2010 were Rs. 1,25,000.
You are requested to prepare*Cash*Flow*Statement*as per AS 3 for the year ended 31st March, 2010 after taking into consideration the following also:

On 31st March, 2009 (Rs.) On 31st March, 2010 (Rs.)
Sundry debtors
Sundry creditors
Unpaid expenses 1,50,000
78,000
63,000 1,47,000
83,000
55,000
* (0)
6. Answer the following: 4x4=16 *
* (a) Weak Ltd. acquired the fixed assets of Rs. 100 lakhs on which it received the grant of Rs. 10 lakhs. What will be the cost of the fixed assets as per AS 12 and how it will be disclosed in the financial statements? * (0)
* (b) During the current year 2009-10 M/s L & C Ltd. made the following expenditure relating to its plant and machinery:

Rs.
General repairs
Repairing of electric motors
Partial replacement of parts of machinery
Substantial improvements to the electrical wiring system which will
increase efficiency of the plant and machinery 4,00,000
1,00,000
50,000
10,00,000
What amount should be capitalised according to AS 10? * (0)
* (c) What are the advantages of pre–packaged*accounting*software? * (0)
* (d) Raw materials inventory of a company includes certain material purchased at Rs. 100 per kg. The price of the material is on decline and replacement cost of the inventory at the year end is Rs. 75 per kg. It is possible to convert the material into finished product at conversion cost of Rs. 125.
Decide whether to make the product or not to make the product, if selling price is (i) Rs. 175 and (ii) Rs. 225. Also find out the value of inventory in each case. * (0)


1. (a) Following two problems are regarding issues in Partnership Accounts, kindly solve both:

(i) Anil and Mukesh are partners sharing profit and losses in the ratio of 3:2. Govind is admitted for 1/4th share of firm. Thereafter Madan enters for 20 paisa in a rupee. Compute new profit sharing ratios under both the admission of partners.
(ii) The following Goodwill Account was opened by the partners of R and S, on the admission of H as a new partner into firm Om and Sons. Calculate the share of profit agreed to be given to "H".

Goodwill A/c.
Dr. Cr.
* Rs. * Rs.
1–4–2010 To R’s Capital A/c*
1–4–2010 To S’s Capital A/c 24,800*
18,600 1–4–2010 By R’s Capital A/c*
1–4–2010 By S’s Capital A/c*
1–4–2010 By H’s Capital A/c 12,400*
12,400*
18,600
* 43,400 * 43,400

4x5=20 (0)
* (b) HP is a leading distributor of petrol. A detail inventory of petrol in hand is taken when the books are closed at the end of each month. At the end of month following information is available:

Sales*
General overheads cost*
Inventory at beginning*
Purchases*
June 1 two lakh litres @ 14.25*
June 30 one lakh litres @ 15.15*
Closing inventory 1.30 lakh litres Rs.*
Rs. 47,25,000*
1,25,000*
1,00,000

litres @ 15/- per litre
Compute the following by the FIFO as per AS–2:

(i) Value of Inventory on June 30.
(ii) Amount of cost of goods sold for June.
(iii) Profit/Loss for the month of June.
* (0)
* (c) A and B decide to amalgamate themselves into Sharp Limited. The following are their Balance Sheets as on 31St December, 2009.

Liabilities A Ltd. B Ltd. Assets A Ltd. B Ltd.
Face value and paid up capital
Share capital (Rs.100 each)*
General Reserves*
10% Debentures
5,00,000*
2,00,000*
2,00,000
4,00,000*
1,00,000*
1,50,000 Investments
1000 Shares in B Ltd.*
2000 Shares in A Ltd.*
Sundry Assets
1,30,000*
–*
7,70,000
–*
2,10,000*
4,40,000
* 9,00,000 6,50,000 * 9,00,000 6,50,000
Compute the amount of purchase consideration each of these companies under purchase method as per AS–14. * (0)
* (d) H purchased 500*equity*shares*of Rs.100 each in the ABC Company Limited for Rs.62,500 inclusive ofbrokerage*and stamp duty. Some years later the company decided to capitalise its profit and to issue to the holders of equity shares one equity share as Bonus for every equity share held by them. Prior to capitalization, the shares of ABC Company Limited were quoted at Rs.175 per share. After the capitalization, the shares were quoted at Rs.92.50 per share. H sold the Bonus shares and received Rs.90 per share. Show Investment A/c in H’s books on average cost basis as per AS–13. * (0)
2. The Young Trust runs a Charitable Hospital and a Dispensary. The following information is available for the year ended 31st March, 2009 from the books of accounts:

Dr.
Rs. Cr.
Rs.
Capital Fund*
Donations received during the year*
Recovery of the Rent*
Fees received from patients*
Recovery of Food Supplies*
Surgical Equipments*
Building & Operation Theatres*
Consumption in the Hospital of:*
Medicines
Food Stuff
Chemicals
Closing Stock of Hospital*
Medicines
Food Stuff
Chemicals
Sales of Medicines (Dispensary)*
Opening Stock of Medicines (Dispensary)*
Purchase of Medicines (Dispensary)*
Salaries:*
Administrative Staff
Doctors/Nurses
Assistant at the Dispensary
Electricity & Power Charges:*
Hospital
Dispensary
Furniture & Equipment*
Ambulance*
Postage & Telephone Expenses less recovery*
Subscription to Medical Journals*
Ambulance Maintenance Charges less recovery*
Consumption Bed Sheets*
Fixed Deposits made on 01–04–2008*
for three years at interest @ 11% p.a.
Cash & Bank Balances*
Sundry Debtors (Dispensary)*
Sundry Creditors (Dispensary)*
Remuneration to Trustees, Trust Office Expenses etc.




4,55,000*
3,20,000*

1,20,000*
90,000*
30,000*

20,000*
4,000*
1,000*

55,000*
3,00,000*

30,000*
1,50,000*
15,000*

1,05,000*
2,000*
80,000*
30,000*
26,000*
21,000*

90,000*

5,00,000*
41,300*
60,500*

21,000 9,00,000*
6,00,000*
2,75,000*
3,00,000*
1,40,000*

3,10,000*

800*

41,000
Additional Information:

(a) The dispensary supplied medicines to the hospital worth Rs.60,000, for which no adjustment was made in the books.
(b) The closing stock of the medicines was Rs.40,000 at the dispensary.
(c) The stock of medicines on 31st March, 2009 at the hospital included Rs.4,000 worth of medicines belonging to the patients, which has not been considered while arriving at the figure of consumption of medicines.
(d) The donations were received towards Corpus of the Trust.
(e) On 15th August, 2008, surgical equipments were donated having market value of Rs.40,000.
(f) The hospital is to receive the grant of 25% of the amount spent on treatment of the poor patients from the Red Cross Society. Such expenditure was Rs.50,000.
(g) Out of the fees recovered from the patients 10% is to be given to the Specialist retained by the Hospital.
(h) Depreciation on the assets on the closing balances:
Surgical Equipments @ 20%.
Building @ 5%.
Furniture & Equipments @ 10%.
Ambulance @ 30%.
You are required to prepare:

(i) Income and Expenditure Account of the Hospital, Dispensary and Trust.
(ii) Statement of Affairs of the Trust for the year ended 31st March, 2009.

16 (0)
3. From the following information, prepare a*Cash*Flow*Statement*as per AS–3 for Banjara Ltd., using direct method:

Balance Sheet as on March 31, 2010 (Rs’ 000)
* 2010 2009
Assets:
Cash on hand and balances with bank*
Marketable securities (having one month Maturity)*
Sundry Debtors*
Interest Receivable*
Inventories*
Investments*
Fixed Assets at Cost*
Accumulated Depreciation*
Fixed Assets (net)

200*
670*
1,700*
100*
900*
2,500*
2,180*
(1,450)*
730

25*
135*
1,200*
–*
1,950*
2,500*
1,910*
(1,060)*
850
Total Assets 6800 6,660
Liabilities:
Sundry Creditors*
Interest Payable*
Income tax Payable*
Long term Debt
150*
230*
400*
1,110
1,890*
100*
1,000*
1,040
Total Liabilities 1,890 4,030
Shareholder’s Fund:
Share Capital
Reserves
1,500*
3,410
1,250*
1,380
* 4,910 2,630
Total Liabilities and Shareholder’s Fund 6,800 6,660
Statement of Profit or Loss for the year ended 31–3–10
(Rs ‘000)
Sales*
Cost of sales*
Gross Profit*
Depreciation*
Administrative and Selling expenses*
Interest expenses*
Interest income*
Dividend*income*
Net profit before taxation and extraordinary items*
Extraordinary items:
Insurance proceeds from earthquake disaster settlement*
Net profit after extraordinary items*
Income tax*
Net profit 30,650*
(26,000)
4,650*
(450)*
(910)*
(400)*
300*
200*
3,390

140*
3,530
(300)*
3,230
Additional Information
(Rs. ‘000)
(i) An amount of Rs.250 was raised from the issue of share capital and a further Rs.250 was raised from long–term borrowings.
(ii) Interest expense was Rs.400 of which Rs.170 was paid during the period Rs.100 relating to interest expense of the prior period was also paid during the period.
(iii) Dividends paid were Rs.1,200.
(iv) Tax deducted at source on dividends received (included in the tax expense of Rs.300 for the year) amounted to Rs.40.
(v) During the period the enterprise acquired Fixed Assets for Rs.350. The payment was made in cash.
(vi) Plant with original cost of RS.80 and accumulated Depreciation of Rs.60 was sold for Rs.20.
(vii) Sundry debtors and Sundry creditors include amounts relating to credit sales and credit purchase only.
16 (0)
4. Ramu, Shamu and Raju were partners sharing profits and losses in the ratio of 3:2:2. Their Balance Sheet as on 01–01–2009 was as follows:

Liabilities Rs. Assets Rs.
Capital Accounts*
Ramu30,000
Shamu20,000
Raju20,000
Reserves*
Creditors


70,000*
14,000*
24,951 Fixed Assets*
Stock*
Debtors*
Cash & Bank 80,000*
15,000*
12,000*
1,951
* 1,08,951 * 1,08,951
On 1st October, 2009 Ramu died. His heirs agreed that:

(i) Goodwill of the firm be valued at 2 years’ purchase of average profit of past three years. Profits for the year 2006, 2007 and 2008 were Rs.30,000, Rs.40,000 and Rs.47,600 respectively.
(ii) Fixed Assets be revalued at Rs.1,01,000.
(iii) Profit to be shared, earned in subsequent period after death of Ramu till settlement of his executors’ claim.
Ramu’s heirs account was settled on 31–12–2009 by bringing in required cash by remaining partners in equal proportion leaving cash balance of Rs.1,234. Each partner had drawn @ Rs.1,000 per month for personal use.
Profit for the current year after charging depreciation of Rs.9,000 (Rs.6,000 for first three quarters and Rs.3,000 for last quarter) was Rs.46,600 earned evenly through–out the year.
You are requested to prepare Profit & Loss Appropriation A/c, Cash & Bank A/c, Ramu’s A/c and Partners’ Capital Accounts for the year ended on 31–12–2009 assuming remaining partners’ decided not to retain goodwill in the books. 16 (0)
5. (a) The following is the Balance Sheet of Bumbum Limited as at 31st March, 2009:

Sources of Funds Rs.
Authorized Capital*
50,000 Equity shares of Rs.10 each*
10,000 Preference Shares of Rs.100 each

5,00,000*
10,00,000
Issued subscribed and paid up 15,00,000
30,000 Equity shares of Rs.10 each*
5,000 Redeemable 8% Preference shares of Rs.100 each*
Reserves & Surplus
Securities Premium
General Reserve
Profit & Loss A/c
2500, 9% Debentures of Rs.100 each*
Sundry Creditors
6,00,000*
6,50,000*
1,80,000*
2,50,000*
1,70,000
* 26,50,000
Application of Funds
Fixed Assets(net)*
Investments (market value Rs.5,80,000)*
Deferred Tax Assets*
Sundry Debtors*
Cash & Bank balance*
Preliminary expenses
7,80,000*
4,90,000*
3,40,000*
6,20,000*
2,80,000*
1,40,000
* 26,50,000
In Annual General Meeting held on 20th June, 2009 the company passed the following resolutions:

(i) To split equity share of Rs.10 each into 5 equity shares of Rs.2 each from 1st July, 09.
(ii) To redeem 8% preference shares at a premium of 5%.
(iii) To redeem 9% Debentures by making offer to debenture holders to convert their holdings into equity shares at Rs.10 per share or accept cash on redemption.
(iv) To issue fully paid bonus shares in the ratio of one equity share for every 3 shares held on record date.
On10th July, 2009 investments were sold for Rs.5,55,000 and preference shares were redeemed.
40% of Debenture holders exercised their option to accept cash and their claims were settled on 1st August, 2009.
The company fixed 5th September, 2009 as record date and bonus issue was concluded by 12th September, 2009.
You are requested to journalize the above transactions including cash transactions and prepare Balance Sheet as at 30th September, 2009. All working notes should form part of your answer. 12 (0)
* (b) Ujju Enterprise furnishes you the following information for the period October to December, 2009. You are requested to draw up Debtors Ledger Adjustment Account in the General Ledger:

(i) Total sales amounted to Rs.2,20,000 including sale of old motor car for Rs.10,000 (book value Rs.5,000). Total credit sales were 80% higher than the cash sales.
(ii) Cash*collection*from debtors amounted to 60% of the aggregate of the opening debtors amounting to Rs.40,000 and credit sales for the period. Debtors were allowed discount of Rs.10,000.
(iii) Bills receivables drawn during the period totalled Rs.20,000 of which one bill of Rs.5,000 was dishonoured for non–payment as the party became insolvent, his estate realized 50 paise in a rupee.
(iv) A sum of Rs.3,000 was written off as bad debts, Rs.7,000 was realized against bad debts written off in earlier years and provision of Rs.6,000 was made for doubtful debts.
4 (0)
6. (a) The partners of Shri Enterprises decided to convert the partnership firm into a Private Limited Company Shreya (P) Ltd. with effect from 1st January, 2008. However, company could be incorporated only on 1st June, 2008. The business was continued on behalf of the company and the consideration of Rs.6,00,000 was settled on that day along with interest @ 12% per annum. The company availed loan of Rs.9,00,000 @ 10% per annum on 1St June, 2008 to pay purchase consideration and for working capital. The company closed its accounts for the first time on 31st March, 2009 and presents you the following summarized profit and loss account:

Rs. Rs.
Sales*
Cost of goods sold*
Discount to dealers*
Directors’ remuneration*
Salaries*
Rent*
Interest*
Depreciation*
Office expenses*
Sales promotion expenses*
Preliminary expenses*
(to be written off in first year itself)
Profit
11,88,000*
46,200*
60,000*
90,000*
1,35,000*
1,05,000*
30,000*
1,05,000*
33,000*

15,000 19,80,000*

18,07,200*
1,72,800
Sales from June, 2008 to December, 2008 were 2 1/2 times of the average sales, which further increased to 3 1/2 times in January to March quarter, 2009. The company recruited additional work force to expand the business. The salaries from July, 2008 doubled. The company also acquired additional showroom at monthly rent of Rs.10,000 from July, 2008.
You are required to prepare a Profit and Loss Account showing apportionment of cost and revenue between pre–incorporation and post–incorporation periods.
Also suggest how the pre–incorporation profits/losses are to be dealt with. 10 (0)
* (b) Sonam Corporation sells goods on hire purchase basis. The hire purchase price is cost plus 50%.
From the following particulars prepare Hire Purchase Trading Account for the year ended 31st March, 2010:

Instalments not yet due on 01–04–09*
Instalments due on 01–04–09*
Goods sold on hire purchase during the year*
Instalments collected from HP debtors*
Stock with customers at hire purchase price*
Goods re–possessed during the year*
On 31–03–2010 Goods repossessed were valued at 3,00,000*
1,50,000*
9,00,000*
6,80,000*
4,50,000*
60,000*
Cost less 40%
6 (0)
7. Answer any*four*of the following: 4x4=16 *
* (a) A company installed a plant at a cost of Rs.20 lacs with estimated useful life of 10 years and decided to depreciate on straight line method. In the fifth year company decided to switch over from straight line method to written down value method. Compute the resultant surplus/deficiency if any, and state how will you treat the same in the accounts. * (0)
* (b) A large size multi department’s hospital decided to outsource the accounting functions. Hospital invited proposals from vendors through open tender and received three proposals. How will you select the vendor? * (0)
* (c) An amount of Rs.9,90,000 was incurred on a contract work upto 31–3–2010. Certificates have been received to date to the value of Rs.12,00,000 against which Rs.10,80,000 has been received in cash. The cost of work done but not certified amounted to Rs.22,500. It is estimated that by spending and additional amount of Rs.60,000 (including provision for contingencies) the work can be completed in all respects in another two months. The agreed contract price of work is Rs.12,50,000. Compute a conservative estimate of the profit to be taken to the Profit and Loss Account as per AS–7. * (0)
* (d) A trader intends to take a loss of profit policy with indemnity period of 6 months, however, he could not decide the policy amount. From the following details, suggest the policy amount:

Rs.
Turnover in last financial year*
Standing charges in last financial year 4,50,000*
90,000
Net profit earned in last year was 10% of turnover and the same trend expected in subsequent year.
Increase in turnover expected 25%.
To achieve additional sales, trader has to incur additional expenditure of Rs.31,250. * (0)
* (e) From the following details find out the average due date:

Date of Bill Amount (Rs.) Usance of Bill
29th January, 2009 5,000 1 month
20th March, 2009 4,000 2 months
12th July, 2009 7,000 1 month
10th August, 2009 6,000 2 months
* (0)

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Answered By StudyChaCha Member

Will you please give me the Chartered Accountancy- Integrated professional Competence Course Examination- Group I Law, Ethics And Communication previous years question papers?

As you want to get the Chartered Accountancy- Integrated professional Competence Course Examination- Group I Law, Ethics And Communication previous years question papers so here is the information of the same for you:

1. (a) Z rented out his house situated at Mumbai to W for Rs. 10,000 per month. A sum of Rs. 5 lacs, the house tax payable by Z to the Municipal Corporation being in arrears, his house is advertised for sale by the Corporation. W pays the Corporation, the sum due from Z to avoid legal consequences. Referring to the provisions of the Indian Contract Act, 1872 decide whether W is entitled to get the reimbursement of the said amount from Z. 5 (0)
* (b) State with reasons whether the following statements are correct or incorrect: 2 x 1 = 2 *
* * (i) Employees’ can relinquish their right to receive minimum bonus by an agreement with employer. * (0)
* * (ii) Ratification of agency is valid even if knowledge of the principal is materially defective. * (0)
* (c) Pick out the correct answer from the following and give reasons: 3 x 1 = 3 *
* * (i) X sells the goodwill of his retail store to Y for Rs. 5 lacs and promises not to carry on the same business forever and anywhere in India. Is the agreement :

1. Valid
2. Void
3. Voidable
4. Illegal
* (0)
* * (ii) A without B’s authority let outs B’s flat to C. Afterwards B accepts rent of the flat from C. It is an agency by :

1. Holding out
2. Estoppel
3. Ratification
4. Necessity
* (0)
* * (iii) P, obtains a cheque drawn by M by way of gift. Here P is a :

1. holder in due course
2. holder for value
3. holder
4. None of the above
* (0)
2. (a) UMC, Limited has only 7 shareholders having fully paid-up shares. On 30th April, 2009, all the shares of X (a shareholder of the company) are sold to Y (another shareholder of the company) in an auction by the order of the court. Z , (a shareholder of the company) was in USA for a business trip from January and thus he was not aware of the developments. The company continues to carry on its business thereafter. In December, 2009, the company borrowed a sum of Rs. 5 lacs from the Unique Bank. Later, the company was wound up and the assets of the company were not sufficient for the*payment*of its liabilities. The Bank filed a suit against Y and Z for recovery of the said*loan*from them. Decide the liabilities of Y and Z under the provisions of Companies Act, 1956. Would your answer be the same, if the said loan was taken in the month of March, 2009? 5 (0)
* (b) State with reasons whether the following statements are correct or incorrect: 2 x 1 = 2 *
* * (i) Issue of debentures with voting rights in not permissible * (0)
* * (ii) A private company is required to hold the statutory meeting. * (0)
* (c) Pick out the correct answer from the following and give reasons: 3 x 1 = 3 *
* * (i) Contracts entered into by a company after its incorporation and before it is entitled to commence business are called:

1. provisional contracts
2. pre–incorporation contracts
3. both 1 and 2
4. None of the above
* (0)
* * (ii) The underwriting commission on shares must not exceed:

1. 2.0 percent of the issued price of shares
2. 2.5 percent of the issued price of shares
3. 5.0. percent of the issued price of shares
4. 5.5 percent of the issued price of shares
* (0)
* * (iii) Which one of the following requires ordinary resolution ?

1. to change the name of the company
2. to alter the articles of association
3. to reduce the share capital
4. to declare*dividends
* (0)
3. J accepted a bill of exchange and gave it to K for the purpose of getting it discounted and handing over the proceeds to J. K having failed to discount it, returned the bill to J. J tore the bill in two pieces with the intention of cancelling it and threw the pieces in the street. K picked up the pieces and pasted the two pieces together, in such manner that the bill seemed to have been folded for safe custody, rather than cancelled. K put it into circulation and it ultimately reached L, who took it in good faith and for value. Is J liable to pay the bill under the provisions of the Negotiable Instruments Act, 1881 ? 5 (0)
4. In 2009, the Electronics Corporation, a Public Sector establishment under the Department of Science and Technology, Government of Rajasthan starts to sell mobile sets manufactured by it, in addition to T.V. sets, so as to compete with private sector establishments of mobile sets in the market. The*income*from sale of mobile sets is 30 percent of the gross income of the Corporation. The*employees*of the Corporation went on strike to demand Bonus. Decide, whether the demand of the employees is tenable under the provisions of the Payment of Bonus Act, 1965. Would your answer be different, if the income from sale of mobile sets is only 10 percent of the gross income of the Corporation? 5 (0)
5. R, a 57 years old district judge was appointed by the Central Government as Presiding Officer of the Employees’ Provident Funds Appellate Tribunal for a period of five years. After three years, he (R) resigns from his office and ceases to work with immediate effect without handing over the charge to his successor, who was not appointed by the Government till that date. Examine the validity of R's action to cease work under the provisions of the Employee's Provident Funds and Miscellaneous Provisions Act, 1952. 5 (0)
6. S is employed in Golden ice-cream factory, a seasonal establishment. The factory was in operation for four months only during the financial year 2009-10. S was not in continuous service during this period. However, he has worked only for sixty days. Referring to the provisions of the Payment of Gratuity Act, 1972 decide, whether S is entitled to gratuity payable under the Act. Would you answer be the same in case S works for 100 days ? 5 (0)
7. J held 100 partly paid up shares of LKM Limited. The company asked him to pay the final call money on the shares. Due to some unavoidable circumstances he was unable to pay the amount of call money to the company. At a general meeting of the shareholders, the chairman disallowed him to cast his vote on the ground that the articles do not permit a shareholder to vote if he has not paid the calls on the shares held by him. J contested the decision of the Chairman. Referring to the provisions of the Companies Act, 1956 decide, whether the contention of J is valid? 5 (0)
8. The object clause of the Memorandum of Association of RST Limited authorises it to publish and sell text-books for students. The company, however, entered into an agreement with Q to supply 100 laptops worth Rs. 5 lacs for resale purposes. Subsequently, the company refused to make payment on the ground that the*transaction was ultravires the company. Examine the validity of the company's refusal of payment to Q under the provisions of the Companies Act, 1956. 5 (0)
9. K, a member of MNO Limited, appoints L as his proxy to attend the general meeting of the company. Later he (K) also attends the meeting. Both K (the member) and L (the proxy) voted on a particular resolution in the meeting. K’s vote was declared invalid by the chairman stating that since he has appointed the proxy and L’s vote has been considered as valid. K objects to the decision of the Chairman. Decide, under the provisions of the Companies Act, 1956 whether K’s objection shall be tenable? 5 (0)
10. Explain the ‘MCA 21 Program’ introduced by the Government of India to develop computerized environment for company law. How does it serve the interest of all the stakeholders of a company, corporate professionals and the public at large? 5 (0)
PART — II
Answer*all*the questions
11. (a) What is meant by Corporate Governance? Explain the benefits of Good Corporate Governance. 5 (0)
* (b) Explain the concept of Green Accounting System. 5 (0)
12. Explain the various safeguards that should be adopted for overcoming threats faced by an accounting and finance professional. 5 (0)
13. State with reasons whether the following statements are correct or incorrect: 2½x2=5 *
* (a) Corporate Social Responsibility is closely linked with the principles of sustainable development. * (0)
* (b) A good environmental practice improves corporate performance. * (0)
PART — III
Answer*all*the questions
14. (a) Explain the functions of interpersonal communication. 5 (0)
* (b) The statutory meeting of PQR Limited was held on 20th January, 2010 at its registered office at Kolkata. As a secretary of the company, draft the minutes of the statutory meeting of the shareholders of the company. 5 (0)
15. The Board of Directors of RSP Limited agrees with X to hire his (X’s) flat at NOIDA on lease for ten years @ Rs. 20,000 per month for marketing office of the company. You are a senior executive of the Board and the Board asks you to prepare the lease deed for the agreement. Draft a lease deed. 5 (0)
16. State the contents that are required for drafting an Annual Report of a Company. 5 (0)

1. (a) X sent a consignment of mobile phones worth Rs.60,000 to Y and obtained a railway receipt therefore. Later, he borrowed a loan of Rs.40,000 from Star Bank and endorsed the railway receipt in favour of the Bank as security. In transit the consignment of mobile phones was lost. The bank files a suit against the railway for a claim of Rs.60,000, the value of the consignment. The railway contended that the bank is entitled to recover the amount of loan i.e. Rs.40,0000 only. Examining the provisions of the Indian Contract Act, 1872, decide whether the contention of the railway is valid. 5 (0)
* (b) (I) State with reasons whether the following statements are correct or incorrect. 2x1 *
* * * (i) A promissory note duly executed in favour of minor is void * (0)
* * * (ii) No consideration is necessary to create an agency * (0)
* * (II) Choose the correct answer from the following and give reasons. 3x1 *
* * * (i) Where both the parties to an agreement are under mistake as to a matter of fact, which is essential to the agreement, the agreement is :

(a) valid
(b) voidable
(c) void
(d) illegal.
* (0)
* * * (ii) In a contract of guarantee there are :

(a) one contract
(b) two contracts
(c) three contracts
(d) four contracts
* (0)
* * * (iii) Cash is withdrawn by the customer of a bank from the automatic teller machine is an example of :

(a) express contract
(b) void contract
(c) tacit contract
(d) illegal contract
* (0)
* (c) RSP Limited allotted 500 fully paid-up shares of Rs. 100 each to Z, a minor, in response to his application without knowing that he was a minor and entered his name in the Register of members. Later on, the company came to know of this fact. The company cancelled the allotment and struck-off his name from the Register of members and also forfeited his entire share money. He filed a suit against the action of the company. Decide whether Z would be given any relief by the court under the provisions of the Companies Act, 1956. 5 (0)
* (d) (I) State with reasons whether the following statements are correct or incorrect. 2x1 *
* * * (i) A company should file its annual return within six months of the closing of the financial year. * (0)
* * * (ii) If a company does not receive the minimum subscription, it should refund money received from applicants within 120 days of issue of prospectus. * (0)
* * (II) Choose the correct answer from the following and give reasons: 3x1 *
* * * (i) An index of members must be maintained by a company when its membership exceeds:

(a) 20
(b) 50
(c) 70
(d) 80
* (0)
* * * (ii) Unless the Articles provide for a large number, the quorum for a general meeting for a public limited company is :

(a) 1/3*rd*of the members
(b) 5 members personally present
(c) 2 members
(d) 7 members
* (0)
* * * (iii) Sources of funds for buy back of shares are :

(a) Free reserves or securities premium account
(b) The proceeds of any shares or other specified securities
(c) (a) and (b) both
(d) None of the above.
* (0)
2. (a) X was an employee of Universal Limited. He retired from the company on 31st*March, 2010 and died after few months. Y, the heir of X, applied within the prescribed time to the company for payment of due bonus of X. The company refused to pay the bonus. Examine the validity of the company’s refusal and also state the procedure to recover the bonus under the provisions of the Payment of Bonus Act, 1965. 8 (0)
* (b) Explain the Social Sins listed by Mahatma Gandhi. 4 (0)
* (c) MNP Limited was incorporated in September, 2010. Now the company wants to hold its first meeting of the Broad of directors. Draft a notice of the said meeting along with agenda. 4 (0)
3. (a) K is an employee of RST Limited, a software company which works five days in a week. K was not in continuous service during the financial year 2009–10. However, she worked only for 150 days because she was on maternity leave with full pay for 50 days. Referring to the provisions of the Payment of gratuity Act, 1972 decide whether K is entitled to gratuity payable under the act. Would your answer remain the same in case RST Limited works six days in a week? 8 (0)
* (b) Explain the fundamental principles relating to ethics. 4 (0)
* (c) A, B and C are partners of a firm. A retires from the firm by mutual consent due to sickness. Remaining partners (B and C) decide to admit D as a new partner in their fir. Draft a deed for reconstitution of partnership. 4 (0)
4. (a) Unique Builders Limited decides to pay 2.5 percent of the value of debentures as underwriting commission to the underwriters but the Articles of the company authorize on 2.0 percent underwriting commission on debentures. The company further decides to pay the underwriting commission in the form of flats. Examine the validity of the above arrangements under the provisions of the Companies Act, 1956. 8 (0)
* (b) State some examples of ethical issues faced by an individual at the workplace. 4 (0)
* (c) Explain the various forms of formal communication. 4 (0)
5. (a) P draws a bill on Q for Rs.10,000. Q accept the bill. On maturity the bill was dishonoured by non–payment. P files a suit against Q for payment of Rs.10,000. Q proved that the bill was accepted for value of Rs.7,000 and as an accommodation to the plaintiff for the balance amount i.e. Rs.3,000. Referring to the provisions of the Negotiable Instruments Act, 1881 decide whether P would succeed in recovering the whole amount of the bill. 8 (0)
* (b) State with reasons whether the following statements are correct or incorrect. 2x2 *
* * (i) Business and industry are closely linked with environment and resource utilization. * (0)
* * (ii) Trusteeship provides a means of transforming the present capitalist order of society into an egalitarian one. * (0)
* (c) State the reasons for acceptance of change in an organisation. 4 (0)
6. (a) In a General Meeting of PQR Limited the Chairman directed to exclude certain matters determental to the interest of the company from the minutes. M, a shareholder contended that the minutes of the meeting must contain fair and correct summary of the proceeding thereat. Decide whether the contention of M is maintainable under the provisions of the Companies Act, 1956. 8 (0)
* (b) State the objectives of the Central Consumer Protection Council in India. 4 (0)
* (c) Explain the basic principles of interpersonal communication. 4 (0)
7. (a) S retired from the services of PQR Limited on 31*st*March, 2009. He had a sum of Rs.5 lac in his Provident Fund Account. It has become due for payment to S on 30*th*April, 2009 but the company made the payment of the said amount after one year. S claimed for the payment of interest on due amount at the rate of 15 percent per–annum for one year. Decide whether the claim of S is tenable under the provisions of the Employee’s Provident Funds and Miscellaneous Provisions Act, 1952. 4 (0)
* (b) RSP Limited is a Public Limited Company with a limited liability of its members by guarantee of Rs.10 lac to each member. The company increases the liability of the members of Rs.10 lac to each member. The company increases the liability of the members from RS.10 to 15 lac by an alteration made in the liability clause of the Memorandum of Association. Referring to the provisions of the Companies Act, 1956 decide whether the members of the company are liable for the increased liability. 4 (0)
* OR * *
* * The Board of Directors of XYZ Private Limited, a subsidiary of SRN Limited, decides to grant a loan of Rs.2.00 lac to P, the Finance Manager of the company getting salary of Rs.30,000 per month, to buy 400 partly paid–up equity share of Rs.1,000 each of XYZ Limited. Examine the validity of Board’s decision with reference to the provisions of the Companies Act, 1956. 4 (0)
* (c) Explain briefly the key strategies which can be used at the time of implementation of Corporate Social Responsibility policies and practices in a company. 4 (0)
* OR * *
* * Write a note on harassment at workplace. 4 (0)
* (d) State reasons for selecting the oral mode of communication instead of the written mode of communication. 4 (0)
* OR * *
* * X desires to gift his flat to Y. Draft a gift deed. 4 (0)


1. (a) Mr. Singh, an old man, by a registered deed of gift, granted certain landed property to A, his daughter. By the terms of the deed, it was stipulated that an annuity of Rs.2, 000 should be paid every year to B, who was the brother of Mr. Singh. On the same day A made a promise to B and executed in his favour an agreement to give effect to the stipulation. A failed to pay the stipulated sum. In an action against her by B, she contended that since B had not furnished any consideration, he has no right of action.
Examining the provisions of Indian Contract Act, 1872, decide, whether the contention of A is valid? 5 (0)
* (b) State with reasons whether the following statements are correct or incorrect. 2x1=2 *
* * (i) If the pawnor makes a default in the*payment*of debt, or performance of duty, as agreed, the pawnee has a right to sell the thing pledged for which no reasonable notice of the sale is required. * (0)
* * (ii) An "agency coupled with interest" may be terminated, at the instance of the principal at any time. * (0)
* (c) Pick out the correct answer from the following and give reasons: 3x1=3 *
* * (i) A contracts to save B against the consequences of any proceedings, which C may take against B in respect of a certain sum of 500 rupees. This is a :

(1) Contract of guarantee
(2) Quasi contract
(3) Contract of indemnity
(4) Void contract.
* (0)
* * (ii) A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The contract:

(1) can be enforced by A’s representative
(2) can be enforced by B
(3) can be enforced either by A’s representative or by B
(4) cannot be enforced either by A’s representative or by B
* (0)
* * (iii) A negotiable instrument drawn in favour of a minor is :

(1) void
(2) void but not enforceable
(3) valid
(4) None of the above.
* (0)
2. (a) Noble Meters Limited was incorporated with the equity share capital of Rs. 50 lakh. The company received the certificate of incorporation on 20th May, 2009. The company issued the prospectus inviting the public to subscribe for its equity*shares. Meanwhile, the company intended to commence its business. Whether Noble Meters Ltd. is entitled to commence its business without obtaining the certificate to commencement of Business?
Advise the company stating the conditions to be fulfilled for obtaining the certificate to commencement of Business from the Registrar of Companies under Companies Act, 1956. 5 (0)
* (b) State whether the following statements are true or false and give reasons. 2x1=2 *
* * (i) The Articles of Association of a Company can be altered by passing an ordinary resolution in the meeting of the shareholders. * (0)
* * (ii) A transferee becomes a member of the company when the instrument of transfer is submitted with the company. * (0)
* (c) Pick out the correct answer from the following and give reasons: 3x1=3 *
* * (i) Contracts which are entered into, by agents or trustees on behalf of a prospective company before it has come into existence are called:

(1) Provisional contracts
(2) Pre–incorporation contracts
(3) Both provisional and pre–incorporation contracts
(4) None of the above.
* (0)
* * (ii) A prospectus issued by the*financial*institutions*or bank for one or more issues of the securities or class of securities specified in the prospectus is called:

(1) Deemed prospectus
(2) Red–herring prospectus
(3) Abridged prospectus
(4) Shelf prospectus.
* (0)
* * (iii) The gap between two Annual General Meetings must not be more than

(1) 12 months
(2) 15 months
(3) 18 months
(4) 15 months as may be extended by Registrar of Companies to 18 months.
* (0)
3. Standard Airways Limited was incorporated at Chennai in the year 2005, employing 125 workmen. Due to strike of workers, mismanagement in the company and accidental loss of the assets the company suffered heavy losses continuously since its incorporation, resulting in a large part of the capital and assets getting wiped out. Consequently, the company moved an application to the Government of Tamilnadu requesting to exempt the company fully from the application of the provisions of the Payment of Bonus Act, 1965.
Decide, whether the Government of Tamilnadu may grant*exemption*to the Company. State the provisions of law in this regard as stated under the Payment of Bonus Act, 1965. 6 (0)
4. ‘N’ is the holder of a bill of exchange made payable to the order of ‘P’. The bill of exchange contains the following endorsements in blank:

First endorsement ‘P’
Second endorsement ‘Q’
Third endorsement ‘R’
Fourth endorsement ‘S’
‘N’ strikes out, without S’s consent, the endorsements by ‘Q’ and ‘R’. Decide with reasons whether ‘N’ is entitled to recover anything from ‘S’ under the provisions of Negotiable Instruments Act, 1881. 5 (0)
5. Mr. X was an employee of Mutual Developers Limited. He retired from the company after completing 30 years of continuous service. He applied to the company for the payment of gratuity within the prescribed time. The company refused to pay the gratuity and contended that due to stringent financial condition the company is unable to pay the gratuity. Mr. X applied to the appropriate authority for the recovery of the amount of gratuity.
Examine the validity of the contention of the company and also state the provisions of law to recover the gratuity under the Payment of Gratuity Act, 1972. 5 (0)
6. An Executive Committee is to be constituted to assist the Central Board under the provisions of the Employees Provident Funds and Miscellaneous Provisions Act. 1952. State the composition of such Executive Committee. 5 (0)
7. The United*Traders*Association was constituted by two joint Hindu Families consisting of 21 major and 5 minor members. The Association was carrying on the business of trading as retailers with the object for acquisition of gains. The Association was not registered as a company under the Companies Act, 1956 or any other law.
State whether United Traders Association is having any legal status? Will there be any change in the status of this Association if the members of the United Traders Association subsequently were reduced to 15? 5 (0)
8. Mr. ‘Y’, the transferee, acquired 250 equity shares of BRS Limited from Mr. ‘X’, the transferor. But the signature of Mr. ‘X’, the transferor, on the transfer deed was forged. Mr. ‘Y’ after getting the shares registered by the company in his name, sold 150 equity shares to Mr. ‘Z’ on the basis of the share certificate issued by BRS Limited. Mr. ‘Y’ and ‘Z’ were not aware of the forgery. State the rights of Mr. ‘X’, ‘Y’ and ‘Z’ against the company with reference to the aforesaid shares. 5 (0)
9. Modern Furnitures Limited was willing to purchase teakwood estate in Chhattisgarh State. Its prospectus contained some important extracts from an expert report giving the number of teakwood trees and other relevant information in the estate in Chhattisgarh State. The report was found inaccurate. Mr. ‘X’ purchased the shares of Modern Furnitures Limited on the basis of the above statement in the prospectus. Will Mr. ‘X’ have any remedy against the company? When will an expert not be liable? State the provisions of the Companies Act, 1956 in this respect. 5 (0)
10. M. H. Company Limited served a notice of general meeting upon its shareholders. The notice stated that the issue of sweat equity shares would be considered at such meeting. Mr. ‘A’, a shareholder of the M. H. Company Limited complains that the issue of sweat equity shares was not specified fully in the notice. Is the notice issued by M. H. Company Limited regarding issue of sweat equity shares valid according to the provisions of the Companies Act, 1956? Explain in detail. 5 (0)

PART — II
11. (a) Explain the importance of ethical behaviour at the workplace. 5 (0)
* (b) Explain the meaning of the "Iron Law of Responsibility". State the resulting benefits which may be acquired by achieving the long–term objectives through the business activities. 5 (0)
12. Explain the pragmatic reasons for maintaining ethical behaviour in marketing through marketing executives. 5 (0)
13. State with reasons whether the following statements are correct or incorrect. * *
* (a) Fairness and honesty are the pillars of success in business. 2½ (0)
* (b) There is no difference between ethics and morals. 2½ (0)

PART — III
14. (a) What are the merits and demerits of grape–vine form of Communication. 5 (0)
* (b) TKR Limited wants to hold its statutory meeting on 20th December, 2009 to discuss the matters relating to formation of the company and incidental matters thereto.
Draft a notice along with notes in brief for calling statutory meeting of the company. 5 (0)

15. Fifth Annual General Meeting of the shareholders of Devrishi Limited was held on 20th August, 2009 at its registered office at Mumbai. 55 shareholders attended the meeting in person and 6 shareholders in proxy. Several ordinary business regarding adoption of audited Balance Sheet, declaration of*dividend, appointment and re-appointment of directors and auditors were transacted at the meeting.
Draft the minutes of the Fifth Annual General Meeting of the shareholders of Devrishi Limited. 5 (0)
16. A partnership firm was constituted by A, B and C. A, the partner of the firm, expressed his desire to retire from the partnership firm by Mutual consent.
Draft a "Partnership Retirement Deed". 5 (0)

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The Institute of Chartered Accountants of India
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Block A, Sector 62,
Noida,
Uttar Pradesh 201307 ‎
0120 304 5961
India

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