CMA Inter CAA Important Question | Dec 25

Table of Content

Corporate Accounting

1. Accounting for Shares and Debentures - Issue, Forfeiture and Reissue of Shares 
2. Presentation of Financial Statements (As per Schedule III)
3. Cash Flow Statement
4. Accounts of Banking Company
5. Accounts of Electricity Company
6. Accounts of Insurance Company
7. Accounting Standards

Auditing

1. Basic Concepts of Auditing
2. Provision Relating to Audit under Companies Act, 2013
3. Auditing of Different Types of Undertakings

CMA Inter Dec 25 Important Questions Other Subjects Blogs :

1. Important Questions Dec 25 Paper 5 : Business Laws and Ethics
2. Important Questions Dec 25 Paper 6 : Financial Accounting
3. Important Questions Dec 25 Paper 7 : Direct and Indirect Taxation
4. Important Questions Dec 25 Paper 8 : Cost Accounting
5. Important Questions Dec 25 Paper 9 : Operations Management and Strategic Management
6. Important Questions Dec 25 Paper 11 : Financial Management and Business Data Analytics
7. Important Questions Dec 25 Paper 12 : Management Accounting
8. CMA Inter Syllabus (New Updates)
9. CMA Intermediate Online Classes

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Corporate Accounting

Accounting for Shares and Debentures

Question : 1

Priyanka Industries Ltd. has an authorised capital ₹ 2,00,000 divided into shares of ₹ 100 each. Of these, 600 shares were issued as fully paid for payment of machinery purchased from Z Ltd. 800 shares were subscribed for by the public and during the first year ₹ 50 per share was called up payable ₹ 20 on application, ₹ 10 on allotment, ₹ 10 on the first call and ₹ 10 on second call.

The amounts received in respect of these shares were as follows:-

On 600 Shares	Full amount called up
On 125 Shares	₹ 40 Per Share
On 50 Shares	₹ 30 Per Share
On 25 Shares	₹ 20 Per Share

The directors forfeited the 75 shares, on which less than ₹ 40 per share had been paid.

Required: Give Journal Entries recording the above transactions (including cash transactions) and show how Share Capital would appear in the Balance-Sheet of the Company, in accordance with Part 1 of Schedule III to the Companies Act.

Solution:

Question : 2

SDF Limited forfeited 360 equity shares of ₹100 each, which were issued at a discount of 5% for non –payment of allotment money of ₹40 per share. First and final call on this shares @ ₹20 per share was not made 250 out of forfeited shares were re-issued at ₹90 per share as fully paid. Pass necessary journal entries in the books of the company.

Solution:

Question : 3

The issued share capital of KGF Ltd. consists of 50,000 equity shares of ₹10 each fully paid up. The company offers to its shareholders shares on rights basis in the ratio of 1:1; the shares of ₹10 each being offered at a premium of ₹10 per share. Half of the price was payable with the application and the balance was payable on allotment, distribution being as follows:

	With application (₹)	On allotment (₹)
Share Capital	5	5
Share Premium	5	5

All the shareholders accepted the offer. One shareholder holding 150 shares paid the full offer price with his application. Another shareholder holding 100 shares failed to pay the allotment money and his shares were subsequently forfeited. Later, the shares were re-issued as fully paid up for ₹2,000 cash.

Required: Journalise the above-mentioned transactions.

Solution:

Question : 4

Following are the balances appear in the trial balance of XYZ Ltd. as at 31st March, 2023.

	₹
Issued and Subscribed Capital:
10,000; 10% Preference Shares of ₹ 10 each fully paid	1,00,000
1,00,000 Equity Shares of ₹ 10 each ₹ 8 paid up	8,00,000
Reserves and Surplus:
General Reserve	2,40,000
Securities Premium (collected in cash)	25,000
Profit and Loss Account	1,20,000

On 1st April, 2023 the company has made final call @ ₹ 2 each on 1,00,000 Equity Shares. The call money was received by 15th April, 2023. Thereafter the company decided to issue bonus shares to equity shareholders at the rate of 1 share for every 5 shares held and for this purpose, it decided that there should be minimum reduction in free reserves. Pass Journal entries.

Solution:

Question : 5

The following are the extracts from the Balance Sheet of Alfa Ltd. as on 31st March, 20X1: 

Share capital: 1,12,500 Equity shares of ₹ 10 each fully paid – ₹ 11,25,000; 3,375 10% Redeemable preference shares of ₹100 each fully paid – ₹ 3,37,500.

Reserve & Surplus: Capital reserve – ₹ 2,25,000; General reserve –₹ 2,25,000; Profit and Loss Account – $1,68,750.

On 1st April 20X1, the Board of Directors decided to redeem the preference shares at premium of  10% by utilization of reserves.

You are required to prepare necessary Journal Entries including cash transactions in the books of the company. 

Solution:

Question : 6

ABC Ltd. has its share capital divided into Equity Shares of ₹ 10 each. On 1stApril, 2022, the company offered 150 share option to each of its 250 employees at ₹ 70 per share, when the market price was ₹ 160 per share. Fair value per option was ₹ 90. The options were to be exercised between 01-03-2023 and 31-03-2023. 200 employees accepted the offer and paid ₹ 70 per share and the remaining options lapsed. The company closes its books on 31stMarch every year. You are required to show Journal entries as would appear in the books of ABC Ltd. for the year ended 31stMarch, 2023 with regards to employee stock options. 

Solution:

Question : 7

Z Co. Ltd decided to buyback 5,000 equity shares of ₹10 each. It sold investments (Face value) ₹35,000 for ₹47,500. It bought 5,000 equity shares in the open market for ₹45,000 out of free reserves. The Shares bought back were cancelled. The expenses of buyback were ₹500. Pass necessary journal entries in the book of Z Co. Ltd. to record the above transactions.

Solution:

Question : 8

The following balances appeared in the books of B Ltd. as on 31.03.2024:

9% Debentures Account – ₹ 21,00,000

Debenture Redemption Fund Account – ₹ 15,00,000

9% Debenture Redemption Fund Investment Account – ₹ 15,00,000

(Nominal = Cost)

The annual contribution to the Debenture Redemption Fund was ₹ 2,10,000. The company sold its investments for ₹ 21,00,000 and redeemed the debentures on 31.03.2025. Prepare Debenture Redemption Fund Account and Debenture Redemption Fund Investment Account up to 31.03.2025.

Solution:

Question : 9

XYZ Ltd. is issuing 20,00,000 shares of Rs.10 each to the public. N Ltd. has been appointed as the underwriter for 5% of the issue size. The commission payable to the underwriter is 5% of the issue price. Calculate the amount of underwriting commission payable to N Ltd. if the shares are issued at par. How will your answer change if the shares are issued at 20% premium? 

Solution:

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Presentation of Financial Statements (As per Schedule III)

Question : 10

Futura Ltd. had the following items under the head “Reserves and Surplus” in the Balance Sheet as on 31st March, 20X1:

	Amount ₹ in lakhs
Securities Premium Account	80
Capital Reserve	60
General Reserve	90

The company had an accumulated loss of ₹ 250 lakhs on the same date, which it has disclosed under the head “Statement of Profit and Loss” as asset in its Balance Sheet. Comment on accuracy of this treatment in line with Schedule III to the Companies Act, 2013.

Solution:

Question : 11

From the following particulars furnished by Hello Ltd., prepare the Balance Sheet as on 31st March 2022 as required by Part I, Schedule III of the Companies Act, 2013.

Particulars		Debit ₹	Credit ₹
Equity Share Capital (Face value of ₹ 100 each)			50,00,000
Building		27,50,000
Plant & Machinery		26,25,000
Furniture		2,50,000
General Reserve			10,50,000
Loan from State Financial Corporation			7,50,000
Inventory
Raw Materials	2,55,000
Finished Goods	10,00,000	12,55,000
Provision for Taxation			6,40,000
Trade receivables		10,00,000
Short term Advances		2,13,500
Profit & Loss Account			4,33,500
Cash in Hand		1,50,000
Cash at Bank		12,35,000
Unsecured Loan			6,05,000
Trade payables (for Goods and Expenses)			10,00,000

The following additional information is also provided: 

1. Trade receivables of₹2,60,000 are due for more than 6 months. 
2. The cost of the Assets were
3. Building₹30,00,000, Plant & Machinery₹35,00,000 and Furniture₹3,12,500 
4. The balance of₹7,50,000 in the Loan Account with State Finance Corporation is secured by hypothecation of Plant & Machinery.
5. Balance at the Bank includes₹10,000 with Omega Bank Ltd., which is not a Scheduled Bank. 
6. Transfer ₹ 20,000 to general reserve as proposed by Board of directors. 

Solution:

Question : 12

Prepare the Balance sheet as at 31st March 2024 from the particulars furnished by KGF Ltd as per Schedule III of Companies Act,2013. 

Particulars		Amount (₹)
Equity Share Capital		8,00,000
Calls in Arrears		800
Land		1,60,000
Building		2,80,000
Plant & Machinery		4,20,000
Furniture		40,000
General Reserve		1,68,000
Loan from IDBI		1,20,000
Loans (unsecured)		96,800
Provision for taxation		54,400
Sundry Debtors		1,60,000
Advances (Dr.)		34,160
Proposed Dividend		48,000
Profit and Loss Account		80,000
Cash Balance		24,000
Cash at Bank		1,97,600
Preliminary Expenses		10,640
Sundry Creditors (for goods and expenses)		1,60,000
Stock :
Finished Goods	₹1,60,000
Raw Materials	₹40,000	₹2,00,000

Adjustment : 

i. 1500 equity shares were issued for consideration other than cash. 

ii. Loan of ₹1,20,000 for IDBI is inclusive of ₹6,000 for interest accrued but not due. The loan is hypothecated by plant and machinery. 

iii. Debtors of ₹50,000 are due for more than 6 months. 

iv. The cost of assets: 

a. Building-₹3,20,000 

b. Plant and Machinery-₹5,60,000 

c. Furniture -₹50,000 

v. Bank balance includes ₹2,000 with Trust Bank Ltd which is not a scheduled bank. 

vi. Bills receivables for ₹2,20,000 maturing on 30th June 2024 have been discounted. 

vii. The company had contract for the erection of machinery at ₹1,50,000 which is still incomplete. 

Solution:

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Cash Flow Statement

Question : 13

Prepare Cash Flow from Investing Activities of M/s. Exide Furnishings Limited for the year ended 31-03-2024.

Particulars	Amount(₹)
Plant acquired by the issue of 8% Debentures	78,000
Claim received for loss of plant in fire	24,800
Unsecured loans given to subsidiaries	2,42,500
Interest on loan received from subsidiary companies	41,250
Pre-acquisition dividend received on investment made	31,200
Debenture interest paid	58,000
Term loan repaid	2,12,500
Interest received on investment (TDS of ₹4,100 was deducted on the above interest)	34,000
Book value of plant sold (loss incurred ₹4,800)	42,000

 

Solution:

Question : 14

Following is the cash flow abstract of Shyam Ltd. for the year ended 31st March, 2024:

 Cash Flow (Abstract)

Inflows		Outflows
Particulars	Amount (₹)	Particulars	Amount (₹)
Opening balance:		Payment for Account Payables	45,000
Cash	5,000	Salaries and wages	12,500
Bank	35,000	Payment of overheads	7,500
Share capital – shares issued	2,50,000	Property, plant and equipment acquired	2,00,000
Collection on account of Trade Receivables	1,75,000	Debenture redeemed	25,000
Sale of Property, Plant and equipment	35,000	Bank loan repaid	1,25,000
		Taxation	27,500
		Dividends	50,000
Closing balance:		Cash	2,500
		Bank	5,000
	5,00,000		5,00,000

Prepare Cash Flow Statement for the year ended 31^st March, 2024 in accordance with AS 3

Solution:

Question : 15

Intelligent Ltd., a non-financial company has the following entries in its Bank Account. It has sought your advice on the treatment of the same for preparing Cash Flow Statement

1. Loans and Advances given to the following and interest earned on them: 
   1. to suppliers 
   2. to employees
   3. to its subsidiaries companies
2. Investment made in subsidiary Smart Ltd. and dividend received
3. Dividend paid for the year
4. TDS on interest income earned on investments made
5. TDS on interest earned on advance given to supplier
6. Insurance claim received against loss of fixed asset by fire

Discuss in the context of AS 3 Cash Flow Statement.

Solution:

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Accounts of Banking Company

Question : 16

From the following information compute the amount of provisions required to be made in the Profit & Loss Account of a Solution Bank for the Year ended 31st March,2024.

i. Credit outstanding for ₹40 lakhs against which the Bank holds securities worth ₹ 10 lakhs.50% of the above advance is covered by ECGC. The above advance has remained doubtful for more than 3years.
ii. Other Advances:

Particulars	₹ In lakhs
Standard	1250
Sub-Standard	900
Doubtful:
For one year	375
For two year	300
For three year	250
For more than 3 years	175
Loss assets	300

 

Solution:

Question : 17

From the following information for a Bank Compute the amount of discount to be transferred to the Statement of Profit and Loss.

a. Rebate on Bills Discounted (as on 01.04.2023) ₹14,000. Discount Received ₹51,000.
b. The following bills have been discounted during the year:

Amount of Bill	Rate of discount	Due Date  (including grace days)
32,500	13% p.a	June14, 2024
75,000	15% p.a.	July 19, 2024
2,15,000	12% p.a	August 30, 2024

Also pass the necessary journal entry for the unexpired discount as on 31.03.2024.

Solution:

Question : 18

Given below are details of interest on advance of a Solution Bank as on 31.03.2024 : (₹ in Crore)

Particulars	Interest Earned	Interest Received
Performing Assets:
Term Loan	60	40
Cash Credit and Overdraft	375	310
Bills Purchased and Discounted	75	75
Non-Performing Assets:
Term Loan	37.50	2.50
Cash Credit and Overdraft	75	6
Bills Purchased and Discounted	50	10

Calculate the income to be recognized for the year ended 31^st March, 2024.

Solution:

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Accounts of Electricity Company

Question : 19

From the following information of SDF Electricity Co.Ltd., an Electricity generation Project, Compute the following:

i. Depreciation and

ii. Advance against depreciation up to the year 2024-2025 as per Regulation 21 of the central Electricity Regulatory Commission (Terms and Conditions of Tariff), Regulations 2004.

• Date of Commercial Operation of COD: 1st April,2021
• Approved Opening Capital Cost as on 1st April,2021: ₹ 5,00,000
• Weihted average Rate of Depreciation: 5.20%
• Details of allowed Additional capital, Repayment of Loan and weighted Average Rate of Interest on Loan are as follows:

Average Rate of Interest on loan are as follows:

Particulars	2021-2022	2022-2023	2023-2024
Additional capital Expenditure (Allowed)	35,000	10,000	7,500
Repayment of Loan	30,000	35,000	35,000
Weighted Average Rate of Interest on Loan	7.50%	7.60%	7.80%

 

Solution:

Question : 20

Consider the following estimated information provided by XYZ Power Supply Company Ltd. (₹ in lakhs) for the next 5 years: 

Cost of Coal: ₹ 2,000 per year  

Cost of Secondary fuel oil: ₹ 200 per year for first 2 years and ₹ 300 per year for 3-5 years

O and M Expenses: ₹ 250 per year for first 2 years and ₹ 350 per year for 3-5 Years

Maintenance Spares: ₹ 100 per years 

Receivables: ₹ 1,800 per year 

Rate of Interest: 12% 

Calculate the interest on Working Capital. 

Solution:

Question : 21

Calculate depreciation as per 2009 regulations from the following information of an Electricity generation project

i. Date of commercial operation i.e. 1.9.20X1.

ii. The details of actual expenditure incurred up to the date of commercial operation i.e 1.9.20X1 and projected expenditure to be incurred from the date of commercial operation up to 31.3.20X5 for the assets under Transmission system.The details of apportioned approved cost as on the date of commercial operation and projected expenditure to be incurred for the above mentioned assets is summarized below:

[₹ in lakh]

Apportioned approved cost	Actual Cost Incurred as on the date of commercial operation	Proposed Expenditure from the date of commercial operation to 31.3.20X3	Proposed Expenditure for 20X3-X4	Total Expenditure completion cost
4,20,000	4,00,000	1,00,000	20,000	5,20,000

iii.

Average Rate of Depreciation Calculated as per rates Specified in Appendix-III

5.3

5.2

5.2

5.2

Additional capital expenditure of 20,000 lakh has been considered out of 1,00,000 lakh for the year 20X1-X2 and no further additional capital expenditure has been considered as capital cost has been restricted to apportioned approved cost in the absence of revised capital expenditure.

Solution:

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Accounts of Insurance Company

Question : 22

The Revenue Account of a life insurance company shows the life assurance fund on 31st March,2024 at ₹ 30,10,000 before considering the following items:

i. Claims covered under re-insurance of ₹ 60,000.
ii. Bonus utilized in reduction of life insurance premium ₹ 22,500.
iii. Interest accrued on securities ₹ 41,300.
iv. Outstanding premium ₹ 30,000.
v. Claims intimated but not admitted ₹ 1,50,000.

Compute the life Insurance fund after considering the above omission?

Solution:

Question : 23

The Life Insurance Fund of Avni Life Insurance Co. Ltd. was ₹25 lakhs on 31.03.2024. Its actuarial valuation on 31.03.2024 disclosed a net liability of ₹21.25 lakhs. An interim bonus of ₹40,000 was paid to the policy holders during previous two years. It is now proposing to carry forward ₹75,000 and to divide the balance between policy holders and the shareholders. Prepare the

a. Valuation Balance Sheet; 

b. Net profit for the two-year period; and  

c. Distribution of profits.  

Solution:

Question : 24

Prepare the Fire Insurance Revenue Account of Jwala Fire Insurance Ltd. as per IRDA regulations for the year ended 31st March, 2024 from the following details: 

Particulars	Amount (₹)
Claims paid	5,00,000
Legal Expenses regarding claims	10,000
Premiums received	12,50,000
Re-insurance premium paid	50,000
Commission	3,00,000
Expenses of Management	2,00,000
Provision against unexpired risk as on 1st April, 2023	5,75,000
Claims unpaid on 1st April, 2023	50,000
Claims unpaid on 31st March, 2024	80,000

Provide for unexpired risk @ 50% less reinsurance

Solution:

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Accounting Standards 

Question : 25

In a production process, normal waste is 5% of input. 2500 MT of input were put in process resulting in a wastage of 150 MT. Cost per MT of input is 1900. The entire quantity of waste is on stock at the end. State with reference to Accounting standard, the treatment of normal loss and abnormal loss and also find out the amount of abnormal loss, if any and the value of closing inventories.

Solution:

Question : 26

How would you deal with the following in the annual accounts of a company for the year ended 31.3.2023?

“The company has to pay delayed cotton clearing charges over and above the negotiated price for asking delayed delivery of cotton from the supplier’s godown. Up to 2021-22, the company has regularly included such charges in the valuation of closing stock. This being in the nature of interest the company has decided to exclude it from closing stock valuation for the year 2021-22. This would result into decrease in profit by ₹7.60 lakhs.”

Solution:

Question : 27

The information provided by SDF Ltd for the year ended 31/03/2024 and request you calculate the liability and expense to be recognised as per Ind AS 19.

No. of employees (Same as Last year)	150
Employee’s turnover rate	6%
Bonus paid to each employee last year	₹50,000
Increase in bonus rate due to inflation as per regular practice of SDF Ltd	10%

 

Solution:

Question : 28

D Ltd. had outstanding ordinary shares of 10,00,000on 01.04.2020. Profit for the year is ₹20,00,000. D Ltd. had 12% 20,000 convertible debentures outstanding of ₹100 each to be converted into 10 ordinary shares. Tax rate is 30%. Calculate (i) Basic EPS (ii) Diluted EPS

Solution:

Question : 29

An engineering goods company provides after sales warranty for 2 years to its customers. Based on past experience, the company has the following policy for making provision for warranties on the invoice amount on the remaining balance warranty period:

Less than 1 year – 2% provision

More than 1 year – 3% provision

The company has raised invoices as under:

Invoice date	Amount
19th Jan 2022	20,000
29th Jan 2023	12,500
15th Oct 2023	45,000

Compute the provision to be made for warranty under Ind AS as on 31st March 2024.Also compute amount to be debited to profit and loss account for the year ended 31st March 2024.

Solution:

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Auditing

Basic Concepts of Auditing

Question : 30

Audit Report contains ______________.

A.Details of Facts 

B.Details of Frauds 

C.Expression of Opinion 

D.Expression of Suggestions 

Solution:

Question : 31

Test checking requires application of __________________. 

A.mathematical theory  

B.sampling theory

C.geometry theory

D.stakeholder theory 

Solution :

Solution:

Question : 32

SA 600 deals in matters connected with __________.

A.Using the work of another Auditor.

B.Audit Sampling.

C.Comparative Information.

D.Related Parties.

Solution :

Solution:

Question : 33

What is audit trail ? Discuss the statutory provisions relating to audit trail?

Solution :

Solution:

Question : 34

Distinguish between Audit and Investigation.

Solution:

Question : 35

Explain the basic elements of Internal Control.

Solution:

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Provision Relating to Audit under Companies Act, 2013

Question : 36

Analyse Auditor’s responsibility for reporting on Internal Financial Control over Financial Reporting. 

Solution:

Question : 37

Demonstrate the audit procedures to be followed for verification of Cash and Cash Equivalents.

Solution:

Question : 38

Discuss the role of National Financial Reporting Authority (NFRA) in monitoring and enforcing compliance with Auditing Standards.

Solution:

Question : 39

How would an auditor determine Key Audit Matters as per SA - 701, "Communicating Key Audit Matters in the Independent Auditor's Report"?

Solution:

Question : 40

Mention any five attributes to be considered by an auditor while verifying for a depreciation and amortisation expenses.

Solution:

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Auditing of Different Types of Undertakings 

Question : 41

Discuss the procedure to be followed for fixing the remuneration of a Cost Auditor and the reporting requirements of Cost Audit as per CRA-3.

Solution:

Question : 42

What are the special steps involved in conducting the audit of an Educational Institution?

Solution:

Question : 43

According to the Central Co-operatives Societics Act,_________ percentage of the profits of a co-operative society should be transferred to a Reserve Fund before distribution of dividend or payment of bonus to its members. 

A.20%

B.25%

C.30%

D.35%

Solution:

Question : 44

Which of the following is not a part of rural self-governance system in India? 

A.Gram Panchayat 

B.Gram Parishad

C.Panchayat Samiti 

D.Zilla Parishad 

S

Solution: