CMA Inter Suggested Answers | Jun 25 Paper 10 Corporate Accounting and Auditing (CAA)
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CMA Inter Jun 25 Suggested Answer Other Subjects Blogs :
(i) In which of the following ways, the balance in Securities Premium A/c cannot be used as per Section 52 of the Companies Act, 2013?
(A) For issuing fully paid-up bonus shares
(B) For writing off revaluation loss on non-current assets
(C) For writing off discount on issue of shares
(D) For providing for premium on redemption of redeemable preference shares
Reason:
Section 52 does not permit using Securities Premium for writing off revaluation losses. It is restricted to specific uses like bonus shares, writing off discount/loss on issue, and premium on redemption.
(ii) Capital Work-in-Progress should be shown under ___________ in the Balance Sheet.
(A) Non-current Assets
(B) Current Assets
(C) Non-current Liabilities
(D) Current Liabilities
(iii) Cash Flow Statement begins with ___________.
(A) Investing Activity
(B) Operating Activity
(C) Financing Activity
(D) Cash Equivalent
(iv) Which of the following is a principle of insurance?
(A) Principle of indemnity
(B) Insurable interest
(C) Principle of uberrimae fidei
(D) All of the above
Reason:
All listed options—indemnity, insurable interest, and uberrimae fidei (utmost good faith)—are fundamental principles of insurance.
(v) Partly paid-up preference shares can be redeemed.
(A) after the permission from Company Law Board.
(B) after making them fully paid up.
(C) after passing a special resolution.
(D) after the permission from the Board of Directors.
(vi) Use of the work of another auditor is guided by ____________.
(A) SA 600
(B) SA 550
(C) SA 500
(D) SA 450
(vii) Permanent Audit File does not contain ____________.
(A) a record of study and evaluation of internal control system.
(B) significant audit observations of earlier years.
(C) copies of management letters.
(D) analysis of significant ratios and trends.
Reason:
Management letters are specific to the audit period and are thus kept in the current audit file, not the permanent one. Permanent files only include recurring or long-term info like internal controls, past observations, etc.
(viii) Test checking reduces the ____________.
(A) power of the auditor
(B) expenses of an auditor
(C) work of an auditor
(D) liability of an auditor
Reason:
Test checking involves checking a sample instead of all transactions, which helps reduce the auditor’s workload, not their power, expenses, or liability.
(ix) NFRA consists of which of the following?
(A) Accounting Standards Committee
(B) Auditing Standards Committee
(C) Enforcement Committee
(D) All of the above
(x) Cost records are to be maintained as per Form
(A) CRA - 1
(B) CRA - 2
(C) CRA - 3
(D) CRA - 4
(xi) Audit report contains ______________.
(A) details of facts
(B) details of frauds
(C) expression of opinion
(D) expression of suggestions
Reason:
An audit report provides the auditor's opinion on the truth and fairness of the financial statements, not just facts, frauds, or suggestions.
(xii) Which of the following is not an assertion with respect to Revenue and Expenditure?
(A) Existence
(B) Cut-off
(C) Completeness
(D) Presentation and Disclosure
Reason:
Existence is an assertion mainly related to assets and liabilities, not revenue and expenditure. Assertions like cut-off, completeness, and presentation are more relevant for revenue/expenditure.
(xiii) Secretarial audit is covered under Section ___________ of the Companies Act, 2013.
(A) 204
(B) 148
(C) 139
(D) 133
(xiv) According to the Central Co-operative Societies Act, ___________ 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%
Reason:
As per the Central Co-operative Societies Act, 25% of profits must be transferred to the Reserve Fund before any dividend or bonus distribution.
(xv) ___________ refers to the process of conducting the audit of a single organization by more than one auditor.
(A) Joint Audit
(B) Cost Audit
(C) Internal Audit
(D) Continuous Audit
Alpha Co. Ltd. has a paid-up equity share capital of ₹ 20,00,000 in 2,00,000 shares of ₹ 10 each. It resolved to buy-back 50,000 equity shares at ₹ 15 per share. For this purpose it issued 20,000, 12% preference shares of ₹ 10 each, at par, payable along with application. The company has to its credit ₹ 2,50,000 in Securities Premium Account and ₹ 10,00,000 in the General Reserve account. The company utilized the General Reserve. Pass the necessary journal entries.
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.
The following Trial Balance as on 31.03.2025 has been made available to you by A Ltd.
| Particulars | Dr. (₹) | Particulars | Cr. (₹) |
| Buildings | 34,80,000 | Sales | 62,40,000 |
| Machinery | 12,00,000 | Outstanding Expenses | 24,000 |
| Closing Stock | 10,80,000 | Provision for Doubtful Debts (1.4.2024) | 36,000 |
| Loose Tools | 2,76,000 | Equity Share Capital | 24,00,000 |
| Purchases (Adjusted) | 25,20,000 | General Reserve | 4,80,000 |
| Salaries | 7,20,000 | Profit and Loss A/c (31.03.2024) | 3,00,000 |
| Directors' Fees | 1,20,000 | Creditors | 11,04,000 |
| Rent | 3,12,000 | Provision for Depreciation: On Building |
6,00,000 |
| Depreciation | 2,40,000 | Provision for Depreciation: On Machinery |
6,60,000 |
| Bad Debts | 72,000 | ||
| 10% Investment | 14,40,000 | 14% Debentures | 24,00,000 |
| Interest Accrued on Investment | 24,000 | Interest on Debentures Accrued but not due | 1,68,000 |
| Debenture Interest | 3,36,000 | Interest on Investments | 1,44,000 |
| Advance Tax | 7,20,000 | Unclaimed Dividend | 60,000 |
| Sundry Expenses | 2,16,000 | ||
| Debtors | 15,00,000 | ||
| Bank | 3,60,000 | ||
| Total | 1,46,16,000 | Total | 1,46,16,000 |
Additional Information:
(i) Closing stock is more than opening stock by ₹ 9,60,000.
(ii) Provide for doubtful debts @ 4% on Debtors.
(iii) Make a provision for income tax @ 30%.
(iv) Depreciation expense included depreciation of ₹ 96,000 on Building and that of ₹ 1,44,000 on Machinery.
(v) The directors proposed a dividend @ 25% and transfer to General Reserve @ 10%.
(vi) Bills Discounted but not yet matured ₹ 1,20,000.
(vii) Authorized capital of the company is 60,000 equity shares of ₹ 100 each.
Prepare the Statement of Profit and Loss for the year ended on 31.03.2025 and a Balance Sheet as on 31.03.2025. Notes to Accounts should form part of your answer.
PQR Bank Ltd. had extended the following credit lines to a small-scale industry, which had not paid any interest during the year 2024–2025.
| Particulars | Term Loan | Export Credit |
| Balance outstanding on 31.03.2025 | ₹ 70 lakhs | ₹ 60 lakhs |
| DICGC/ECGC cover | 40% | 50% |
| Securities held | ₹ 30 lakhs | ₹ 20 lakhs |
| Realizable value of securities | ₹ 20 lakhs | ₹ 16 lakhs |
Compute necessary provisions to be made for the year ended on 31.03.2025.
The Life Insurance Fund of Prakash Life Insurance Company Limited was ₹ 34,00,000 on 31st March, 2025 and disclosed a Net Liability of ₹ 28,80,000. An interim bonus of ₹ 40,000 was paid to the policyholders during the previous two years. It is now proposed to carry forward ₹ 1,10,000 and to divide the balance between the policyholders and the shareholders.
Show:
(i) The Valuation Balance Sheet.
(ii) The Net Profit for the Two-Year Period, and
(iii) The Distribution of the Profits.
The following information is available from Star Ltd. as on 31.03.2025:
Compute (a) Basic EPS and (b) Diluted EPS.
The following information has been provided by Apex Ltd. for the year ended on 31.03.2025.
(i) Sales for the year ₹ 48,00,000 entirely made in cash. All purchases were on credit.
(ii) Cost of goods sold was 75% of the sales.
(iii) Trade payables on 31.03.2025 was ₹ 1,00,000 more than the balance on 31.03.2024.
(iv) Closing inventory was higher than the opening inventory by ₹ 50,000.
(v) Operating expense of ₹ 3,60,000 were paid during the year.
(vi) Taxes paid during the year were ₹ 1,50,000.
(vii) The company paid interest of ₹ 1,20,000 during the year.
(viii) The company acquired a building for ₹ 4,00,000 and bought a new furniture for ₹ 2,00,000 during the year.
(ix) Dividend was received on investment for ₹ 10,000.
(x) Cash and cash equivalent on 01.04.2024 was ₹ 40,000
(xi) Cash and cash equivalent on 31.03.2025 was ₹ 70,000
You are required to prepare a Cash Flow Statement for the year ended on 31.03.2025 as per AS 3.
Discuss the concept of the Tax Audit with reference to Section 44AB of the Income Tax Act, 1961.
Demonstrate the reporting requirements of Cost Audit as per CRA - 3 guided by Companies (Cost Records and Audit) Rules, 2014.
Examine the reporting requirements as per Companies (Auditor’s Report) Order, 2020 with respect to the following:
(i) Acceptance of deposits [Clause 3(v)]
(ii) Statutory dues [Clause 3(vii)]
(iii) Reporting fraud [Clause 3(xi)]
Briefly discuss the constitution and structure of NFRA. Examine the functions and duties of NFRA.
Prepare a list to show how you will conduct the Audit of Educational Institutions.
Inspect the rights of a company auditor as per Companies Act, 2013.
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