CA Foundation Accounts Paper May 2025 with Answers

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Table of Contents

1. Q 1 (A) : True or False :
2. Q 1 (B) : Explain the following :  (i) What are the
3. Q 1 (C) : A trader prepared his final accounts on 
4. Q 2 (A) : Following errors were found in the books
5. Q 2 (B) : Prepare the Bank Reconciliation Statement
6. Q 3 (A) : The Receipts and Payments Account of ABC
7. Q 3 (B) : A, B and C are partners sharing profits
8. Q 4 (A) : Amal, Bimal & Kamal were in partnership
9. Q 4 (B) : The balance sheet of ABC as on 1st April
10. Q 5 (A) : On 1st July, 2022, Maritime Limited purchased
11. Q 5 (B) : For mutual accommodation of himself and
    OR
12. Q 5 (B) : The following are some of the transactions
13. Q 5 (C) : Following notes pertain to the Balance Sheet
14. Q 6 (A) : R Ltd. invited applications for issuing
15. Q 6 (B) : Define Measurement and Valuation Principles

CA Foundation Jan 25 Suggested Answer Other Subjects Blogs :

1. Suggested answer Jan 25 Paper 2 : Business Laws
2. Suggested answer Jan 25 Paper 3 : Quantitative Aptitude 
3. Suggested answer Jan 25 Paper 4 : Business Economics
4. CA Foundation Syllabus (New Updates)

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Question 1 (A) :

State with reasons, whether the following statements are True or False :

(i) Trade discount is recorded in the discount column in triple column cash book.

Answer:

FALSE : Trade discount is not recorded in the books of accounts

(ii) Money measurement concept means transactions are to be recorded at a uniform-monetary units.

Answer:

TRUE : Measuring unit for money is taken as the currency of the ruling country i.e., the ruling currency of a country provides a common denomination for the value of material objects. 

(iii) If a society (Non-profit organization) has a separate trading activity, the profit/loss from the trading account shall be transferred to Income and Expenditure Account at the time of consolidation.

Answer:

TRUE : Where in case of the trading activities, the profit /loss from such activity to be transferred to the Income and expenditure account in case of consolidated accounts

(iv) Partners in a partnership firm will share the profits of business according to their capital contribution in the absence of any agreement.

Answer:

FALSE : Profits and losses are to be shared equally.

(v) LLP should have two designated partners who are resident in India.

Answer:

FALSE : As per Section 7 of the LLP Act, every limited liability partnership should have at least two designated partners who are individuals and at least one of them should be a resident in India

(vi) "A Non-Profit Organization registered under Section 8 of Companies Act, 2013 can distribute its surplus among its members.

Answer:

FALSE : The Non-profit organisation credits the surplus earned in a year to the general fund maintained by it. 

Question 1 (B) :

Explain the following : 

(i) What are the objectives of accounting standards?

(ii) What is the difference between liability and contingent liability?

Solution:

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Question 1 (C) :

A trader prepared his final accounts on 31st March, each year. Due to some unavoidable reasons, no inventory taking could be possible till 15th April, 2025 on which date total cost of goods in his store came to ₹ 1,50,000.

The following facts were established between 31st March and 15th April, 2025 :

On 25th March, goods of the sale value of ₹30,000 were sent on sale or return basis to a customer, the period of approval being four weeks. He returned 25% of the goods on 12th April, approving the rest; the customer was billed on 25th April.

The trader had also received goods costing ₹10,000 in March, for sale on consignment basis. 50% of the goods had been sold by 31st March and another 25% by 15th April. These sales are not included in above sales.

Goods are sold by the trader at a profit of 20% on sales.

You are required to ascertain the value of inventory as on 31st March, 2025.

Solution:

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Question 2 (A) :

Following errors were found in the books of XYZ. Give necessary entries to correct them:

(i) A purchase of goods from R amounting to ₹10,000 has been wrongly entered through the sales book.

(ii) Furniture purchased for office use amounting to ₹25,000 has been entered in the purchase day book.

(iii) Minor repairs to the Furniture Account amounting to ₹1,500 were debited to Furniture Account.

(iv) Wages amounting to ₹3,000 paid to workmen for making office furniture has been charged as wages account.

(v) Tuition fees of proprietor’s son ₹25,000 has been debited to Audit Fees A/c.

(vi) An amount of ₹10,000 due from Mohan which had been written off as bad debt in the previous year was unexpectedly recovered and has been posted to the personal account of Mohan.

(vii) Goods (Cost being ₹7,000 and sales price being ₹10,000) distributed as free samples among prospective customers were not recorded anywhere.

(viii) Goods amounting to ₹1,000 returned by a customer, G & Co. were entered in the Sales Day Book and posted there from to the credit of his account.

(ix) A bill of exchange (received from SS & Co.) for ₹10,000 had been returned by the bank as dishonoured and had been credited to the bank and debited to bills receivable account.

(x) A bills receivable for ₹2,500 was passed through Bills Payable Book. The bill was given by Jack.

Solution:

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Question 2 (B) :

Prepare the Bank Reconciliation Statement of M/s. XYZ Brothers on 31st March, 2025 from the particulars given below:

(i) The Bank Pass Book had a debit balance of ₹62,500 on 31st March, 2025.

(ii) A cheque worth ₹1,000 directly deposited into bank by customer but no entry was made in the Cash Book.

(iii) Out of cheques issued worth ₹85,000, cheques amounting to ₹50,000 only were presented for payment till 31st March, 2025.

(iv) A cheque for ₹10,000 received and entered in the Cash Book but it was not sent to the Bank.

(v) Cheques worth ₹50,000 had been sent to Bank for collection but the collection was reported by the Bank as under:

1. Cheques collected before 31st March, 2025: ₹35,000

2. Cheques collected on 10th April, 2025: ₹10,000

3. Cheques collected on 12th April, 2025: ₹5,000

(vi) The Bank made a direct payment of ₹1,500 which was not recorded in the Cash Book.

(vii) Interest on overdraft charged by the bank ₹4,000 was not recorded in the Cash Book.

(viii) Bank charges worth ₹200 have been entered twice in the Cash Book whereas insurance charges for ₹175 directly paid by Bank was not at all entered in the Cash Book.

(ix) The credit side of bank column of Cash Book was undercast by ₹5,000.

Solution:

Bank Reconciliation Statement of M/s. XYZ Brothers

As on 31st March, 2025

 

Question 3 (A) :

The Receipts and Payments Account of ABC Club for the year ended March 31, 2025 was as follows:

Receipts		Amount	Payments		Amount
Cash in hand		150	Ground man’s Fee		1,125
Balance at Bank as per Pass Book:	Deposit Account	3,345	Moving Machine		2,250
	Current Account	900	Ground Rent		375
Bank Interest		45	Cost of Teas		375
Donations and Subscriptions		3,900	Fares		600
Receipts from teas		450	Printing & Office Expenses		420
Contribution to fares		150	Repairs to Equipment		750
Sale of Equipment		120	Honorarium to Secretary and Treasurer of 2024		600
Net proceeds of Variety Entertainment		1,170	Balance at Bank as per Pass Book:	Deposit Account	4,635
Donation for forthcoming Tournament		1,500		Current Account	225
			Cash in hand		375
Total		11,730	Total		11,730

You are given the following additional information:

(Figures are in ‘000)

For the year ended March 31, 2025, the honorarium to the Secretary and Treasurer are to be increased by a total of ₹ 3,00,000.

Prepare the Income and Expenditure Account and Balance Sheet for the period ending March 31, 2025.

Solution:

ABC Club

Income and Expenditure Account for the year ended 31st March, 2025

 

Balance Sheet of Exe Club as on 31st March, 2025

 

Balance Sheet as on 1st April, 2024

Question 3 (B) :

A, B and C are partners sharing profits and losses in the ratio of 2:2:1.  Their Balance Sheet as on 31st March, 2024 is as follows:

The partners have agreed to take D as a partner w.e.f. 1st April, 2024 on the following terms:

(i) D shall bring ₹7,500 towards his capital and required sum of goodwill.

(ii) The value of stock should be increased by ₹3,750.

(iii) Provision for bad and doubtful should be provided at 10% of the debtors.

(iv) Furniture should be depreciated by 10%.

(v) The value of Land and Buildings should be enhanced by 20%.

(vi) The value of the goodwill is fixed at ₹22,500.

(vii) General Reserve will be transferred to the Partners’ Capital Accounts.

(viii) The new profit-sharing ratio of A, B, C and D shall be 5 : 5 : 3 : 2.

(ix) The outstanding liabilities include ₹1,500 due to R has been paid by A. Necessary entry was not made in the books.

You are required to prepare:
(1) Revaluation A/c
(2) Capital Accounts of the Partners
(3) Balance Sheet as at that 1st of April, 2024.

Solution:

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Question 4 (A) :

Amal, Bimal & Kamal were in partnership sharing profits in the proportions of 3 : 2 : 1. The balance sheet of the firm as on 31st March, 2024 was as under:

Amal had been suffering from ill-health and gave notice that he wished to retire. An agreement was, therefore, entered into as on 31st March, 2024, the terms of which were as follows:

(i) The profit and loss account for the year ended 31st March, 2024 which showed a net profit of ₹1,50,000 was to be re-opened. Bimal was to be credited with ₹30,000 as bonus, in consideration of the extra work which had devolved upon him during the year. The profit-sharing ratio was to be revised to enable partners to share profits/losses equally w.e.f. 1st April, 2023.

(ii) Goodwill was to be valued at three years’ purchase of the average profits of the preceding four years. The following were the amounts of profit for the past four years:

(iii) Fixtures were revalued at ₹1,00,000. Building was to be appreciated by 10%. Inventories were to be written down by ₹25,000. A provision of 2.5% was to be made for doubtful debts and the remaining assets were to be taken at their book values.

Bimal and Kamal agreed, as between themselves, to continue the business, sharing profits in the ratio of 3 : 2. The amount due to Amal is to be transferred to his loan account to be settled later.

You are required to prepare:
(1) Revaluation Account
(2) Partners’ Capital Accounts

Solution:

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Question 4 (B) :

The balance sheet of ABC as on 1st April, 2024 was as follows:

 

During 2024-25, his Profit and Loss Account revealed a net profit of ₹8,37,500. This was after allowing for the following:

(i) Commission paid to selling agent ₹81,250
(ii) Discount received from creditors ₹93,750
(iii) Purchased a vehicle of ₹62,500 on 31st March, 2025
(iv) Depreciation on Furniture and Fixtures @10% and on Vehicle @20%
(v) A provision for doubtful debts @3% of the trade receivables as at 31st March, 2025, but while preparing the Profit and Loss Account he had forgotten to provide for

 (1) Prepaid expenses ₹18,750
 (2) Outstanding commission ₹43,750

His current assets and liabilities on 31st March, 2025 were:
Inventories ₹8,12,500,
Trade Receivables ₹16,25,000 (before provision for doubtful debts),
Cash at Bank ₹6,87,500 and
Trade Payables ₹1,82,500.

During the year he introduced further capital of ₹3,75,000 into the business.

You are required to prepare the balance sheet as at March 31, 2025.

Solution:

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Question 5 (A) :

On 1st July, 2022, Maritime Limited purchased second-hand machine for ₹1,20,000 and reconditioned the same by spending ₹18,000. In 1st January, 2023 a new machine was purchased for ₹72,000.

On 30th June, 2024 the machine purchased on 1st January, 2023 was sold for ₹48,000 and another machine was installed at a cost of ₹90,000.

Rate of depreciation is 15% on original cost every year.

Solution:

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Question 5 (B) :

For mutual accommodation of himself and Gagan, Aman drew upon Gagan a bill of ₹7,500 at 3 months on 01.04.2024. Gagan accepted the bill and returned to Aman who discounted it immediately @ 8% p.a. According to agreement, Aman and Gagan shared the proceeds as 2 : 1.

On the date of maturity Aman remitted his share to Gagan who honoured the bill by payment.

Show journal entries in the books of Aman and Gagan.

Solution:

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OR

Question 5 (B) :

The following are some of the transactions of Digital Store for  the year 2024–25 as per their Rough Book:

• Sold to M/s Alpha Industries
  10 Laptops @ ₹77,000 per laptop
  5 LaserJet Printers @ ₹21,000 per printer
  Less: Trade Discount @ 15%

• Sold old furniture to Singh Consultants on credit ₹19,000

• Sold 20 Desktops to Brown & Co. @ ₹34,000 per desktop on credit

• Sold 10 Tablets to GOKU Institute @ ₹7,000 per tablet for cash

• Sold on credit to JAT Enterprises
  15 Mobile phones @ ₹25,000 per mobile phone
  10 External Hard Disk @ ₹4,500 per external hard disk
  Less: Trade Discount @ 10%

Make out the Sales Book of Digital Store.

Solution:

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Question 5 (C) :

Following notes pertain to the Balance Sheet of PQR Company Limited as at 31st March, 2024.

On 30th April, 2024, the Company has made final call @ ₹30 each on 1,50,000 equity shares. The call money was received by 31st May, 2024.

Thereafter, on 1st July, 2024 the company decided to issue bonus shares at the rate of 3 equity shares for every 5 equity shares held by way of capitalising its reserves. It decided that there should be minimum usage of balance in Profit & Loss A/c.

On 1st October, 2024, the Company issued Rights shares at the rate of one equity share for every five shares held on that date at a premium of 10%. All the rights shares were accepted by the existing shareholders and the money was duly received by 31st October, 2024.

Show necessary journal entries in the books of the company for bonus issue and rights issue. Also prepare notes on Share Capital & Reserve & Surplus relevant to the Balance Sheet of the company after the issue of bonus shares & rights share.

Solution:

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Question 6 (A) :

R Ltd. invited applications for issuing 1,00,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share. The amounts were payable as follows:

• On application & allotment - ₹ 6 per share (including premium)

• Balance on the First & Final Call

Applications were received for 2,50,000 shares. Applications for 1,00,000 equity shares were rejected and pro-rata allotment was made to the remaining applicants. The first & final call was made. The amount was duly received except on 3,000 shares applied by Ms. Jane. Her shares were forfeited.

The forfeited shares were reissued as fully paid-up @ ₹ 8 per share.

Pass necessary Journal entries to record the above transactions in the books of R Ltd.

Solution:

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Question 6 (B) :

Define Measurement and Valuation Principles in brief.

Solution:

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